EXTENSION TO PROVIDE EMERGENCY AND TRANSITIONAL HOUSING (8)
I
I
AGREEMENT FOR PUBLIC SERVICES FUNDED
UNDER THE CLEARWATER COMMUNITY DEVELOPMENT
BLOCK GRANT PROGRAM
PART I
This
agreement is entered into this
;L3~ay of j)-e-ce:!kk~
198~, by the CITY OF CLEARWATER, FLORIDA, a political subdivision of the
State of Florida, hereinafter referred to as the "CITY", and RELIGIOUS
COMMUNITY SERVICES, INC.,
hereinafter referred to as the "PSA", a non-
profit corporation organized and existing under the laws of the State of
Florida, having its principal office in Clearwater, Florida, and consists
of Part I and Appendices.
WHEREAS, the City has agreed with the United States Department of
Housing and Urban Development to conduct a Community Development Program,
hereinafter referred to as the "Program". with federal financial assistance
under Title I of the Housing and Community Development Act of 1974, as
amended, hereinafter called the "Act", and
WHEREAS, the Community Development Department, hereinafter called
the "Department", will act in behalf of the City in Conducting the Program,
and
WHEREAS, the PSA proposes to operate an emergency housing program
of direct benefit to low and moderate income residents within the
Community Development Program target areas of Clearwater, Inc" hereinafter
referred to as the "Project", and desires federal financial assistance
through the City to effect this proposal, and
WHEREAS, the City finds the project to be meritorious and in ful-
fillment of the purposes of the Act;
THEREFORE, the parties agree as follows:
1. The PSA shall, in a satisfactory and proper manner as deter-
mined by the Department, conduct the Project outlined in the attached
Narrative and Budget attached as Appendix A,
2. The term of this agreement shall commence on October 1, 1986
and terminate on September 30,
1987, unless earlier cancelled as provided,
herein,
The Department may issue written or oral instructions to clarify
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any details or provisions of thi~ Agreement. Such instructions must be
within the intent of the project and may not be of such nature to affect
cost or period of performance.
3. The City representative with the PSA as regards conduct of
services under this contract shall be the Director of Planning & Urban De-
velopment and the PSA's services shall be carried out under the supervision
of its director or executive director.
4. The PSA shall use the funds to support the Project serving
residents of Neighborhood Target Areas and particularly within the PSA's
area of operation.
The PSA shall not exceed its budgeted amount and shall
use the funds in accordance with the budget to be paid with Community
Development Funds included in Appendix A.
Funds shall not be obligated
when the Project has been suspended or terminated pursuant to Paragraph 17
hereof.
Any funds which the Department determines were not properly
expended shall be refunded to the City,
5. The PSA shall comply with the provisions of OMB Circular A-
lIa which is attached as Appendix C and with the provisions of OMB Circular
A-122, attached as Appendix H. The PSA shall permit the City to audit the
PSA's financial operation including compliance with certain provisions of
Federal law and regulations,
All PSA financial records relating to the
Project are subject to review by the City.
6. All subcontractors to this agreement must be approved by the
City.
7, All purchases of consumables, capital equipment and services
shall be in conformity with the Procurement Standards set forth in Appendix
C, Accountability for project property and equipment shall be in
accordance with the requirements therein set forth,
8. The City agrees to make payment of budgeted costs on a
reimbursement basis. Requests for payment shall be as detailed in Appendix
D, No advance payments shall be made to the PSA. All costs, and invoices
for requests for payment shall be supported by properly executed payrolls,
time records, invoices, contracts, or vouchers, or other offical documenta-
tion evidencing in proper detail the nature and propriety of the charges..
All checks, payrolls, invoices, contracts, vouchers, orders or other
accounting documents pertaining in whole or in part to the agreement shall
101 10/1/85
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be clearly identified and readily accessible,
Final requests
for
reimbursement hereunder shall be submitted within 30 days after completion
of all services to be performed by the PSA and the City shall not be
responsible for payment of any charges, claims or demands hereunder not
received within said thirty day period.
9. The City shall retain custody upon termination of this
agreement of any and all property purchased with Community Development
Funds,
"Property" as used in this Paragraph shall mean nonexpendable
tangible property valued at $50.00 or more with a life expectancy of one
year or more,
The PSA shall retain custody of property acquired with
federal funds so long as the property is used for the purposes described in
Appendix A.
When no longer used for such purpose the City shall assume
custody of the property upon written notice to the PSA.
Upon purchase and
receipt of property, the PSA shall submit to the Department a Property
Receiving Report.
Stolen, lost or returned property shall be reported
immediately to the Department.
Thirty days prior to the end of the grant
year or immediately upon termination of this agreement, the PSA shall
submit in a Property Report a physical inventory of all property purchased
with Community Development Funds,
The report shall also contain a
verification of the existence and current use and location of the property,
and, if applicable, the continued need for the property,
No real or
personal property or custody thereof purchased with such funds shall be
disposed of, transferred, assigned, or loaned by the PSA without prior
written consent of the City.
10, Nothing in this agreement shall be construed to permit
invasion of the privacy of individuals who are served by the project, nor
shall this agreement be construed to require the PSA to publish or release
information to third parties which would invade the privacy of such
individuals.
Information obtained by the Department as required by this
agreement shall not be used or disclosed in such a way as to invade
individual privacy and client relationships, unless Flordia law pertaining
to public records requires disclosure of said information,
11. The PSA shall obtain prior written approval by addendum to
this agreement for any of the following changes:
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a, Substantial chaRges in the project work plan
b. Changes in any budget line item.
12, The PSA agrees to fully participate in the implementation
and maintenance of an evaluation system to continually monitor the project.
This shall include, but not be limited to, periodic submission of data
reports which will be used by the Department for inclusion in the Annual
Grantee Performance Report, periodic monitoring visits by the Department
for conformance with this agreement,
and continuing assessments of
performance
hereunder,
PSA agrees to comply with evaluation
and
information requirements of the Department.
A final report shall be
submitted by the PSA within 30 days after the end of the contract term,
This final report shall consolidate reporting of all project participants,
13. PSA shall establish and maintain on an accrual basis an
accounting system in accordance with the Standards of Grantee Financial
Management Systems as set forth in Appendix C and in accord with generally
accepted accounting principals and standards. PSA agrees to modify or cor-
rect said systems in accordance with the City's requirements.
14, PSA shall maintain such records and accounts as are deemed
necessary by the City to assure a proper accounting for all project funds,
All such records shall be available for audit, inspection or copying pur-
poses at any time during normal business hours and as often as the City,
HUD, and/or representatives of the Comptroller General of the United
States, or other federal agency, may deem necessary, Such records shall be
retained for such period as required by applicable laws and regulations and
may thereafter be destroyed only with the prior written approval of the
City.
Such records shall include financial records, audits, supporting
documents, statistical reports and client files. PSA will comply with such
additional requirements as to maintenance of records as the City may re-
quest in writing.
In the event the PSA cannot continue to be responsible
for maintenance of the records, then the City shall be so notified in order
to take custody of the records,
The City may, at any time, on written
notice to the PSA take custody of any and all records established under
this Agreement.
15. The PSA shall hold and save the City, its officers, agents,
and employees harmless from liability of any nature or kind, including
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costs and expenses, for or on account of any suits or damages of any
character whatsoever resulting from injuries or damages sustained by any
persons or property resulting in whole or in part from the negligent
performance or omission of any employee, agent or representative of the
PSA.
16. The PSA shall not assign any interest in this Agreement
without the prior written consent of the City,
17. The City may suspend, withhold, or terminate payment of the
project, in whole or in part, for cause,
Cause shall include the
following:
a, Ineffective or improper use of project funds
b. Failure to comply with any term or condition hereunder
c. Refusal to accept conditions imposed by HUD
d. Submittal of reports which are incorrect or incomplete
in any material respect
e. If carrying out this Agreement is rendered impossible or
infeasible for any reason including changes in law or
the unavailability of HUD funds necessary for
continuation.
If the City suspends payment, it shall advise the PSA and specify in
writing the actions that must be taken as a condition precedent to the
resumption of payment and specify a reasonable date for compliance.
18. Both parties will use their best effots to ensure that
services under this Agreement are provded so as to best meet the needs of
residents with priority to those residents who reside in the target areas
set forth in Appendix B.
The PSA shall make every effort to assure that a
minimum of two-thirds of those persons receiving services hereunder are
low- and moderate-income.
19, No person with responsibilities in the operation of the
project will discriminate with respect to any project participant because
of race, color, national origin, or sex,
Nor shall any participant be
excluded from participation in,
be denied of, or be subjected to
discrimination under any program of activity funded in whole or in part
with Community Development Funds because of race, color, national origin or
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sex, as set forth in Appendix G, Other Program Requirements CFR 570.601).
20. The PSA will establish safeguards to prohibit employees from
using their positions for a purpose that is or gives the appearance of
being motivated by a desire for private gain for themselves or others,
particularly those with whom they have family,
business or
other
indentifiable ties,
prior to requesting any continued project funding
beyond the term covered by this agreement or for new public services not
covered by this Agreement, the PSA shall attempt to secure other local,
state or federal funding and/or private funding for such project.
The PSA
will not as a result of receiving funding for the project reduce its
support for other similar services already being provided by the PSA in the
area of its operation, and will, in fact, affirmatively seek additional
assistance and support from other sources for increasing services where
needs demand such increase, The PSA will not use these funds for publicity
or propaganda purposes designed to support or defeat legislation pending
before federal, state or local governments.
21. The PSA shall comply with the requirements of Section 3 of
the Housing and Urban Development Act of 1968, as amended and the HUD
regulations issued pursuant thereto, attached hereto as Appendix E.
22. The PSA will comply with Equal Employment Opportunities
Executive Order 11246, as amended, attached hereto as Appendix F,
23. The PSA will comply with applicable federal law and
regulations, including but not limited to:
National Environmental Policy Act of 1969;
Flood Disaster Protection Act of 1973;
HUD Lead-Based Paint Poisoning Prevention Act;
Clean Air Act;
Historic Preservation Requirements of P.L. 89-656;
Archeological and Historic Preservation Act of 1974;
Executive Order 11593;
Architectural Barriers Act of 1968;
Hatch Act;
Federal Water Pollution Control Act;
Federal Labor Standards provisions and the Davis-Bacon Act;
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The Civil Rights Act of 1964;
National flood insurance program;
all as amended from time to time and in effect during the term of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be executed as of the day and year first above written,
RELIGIOUS COMMUNITY SERVICES, INC,
WITNESSES:
By:
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Attest:
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Approved as to form and
correctness:
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G'OQ1S WO~~
JTAC;~~~NT A: BUDGET & NARRATIVE I ..,...../
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1855 Highland Ave., S. . Clearwater, Florida 33516
Telephone (813) 584-3528
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December 4, 1986
Mr, J, D, Sheelor
City of Clearwater
Planning & Urban Development
Post Office Box 4748
Clearwater, Fl, 33518
Dear Mr, Sheelor:
For your records the following rennovations will be made at Emergency
Housing, 1125 Holt Avenue, Clearwater, with the funds for this year,
Units #1101, 1105 and 1109
Replace all bad cabinets & tops
Paint all roofs/tape seams
Install skirting around coaches
Replace bad metal
New paneling-all walls
Install new windows
Install new doors - interior/exterior
Install new floors/plywood (where needed)
Completely remodel all bathrooms
Install new floor tile
Install new plumbing (faucets & drains)
Install new hoods & fan kits
Install new bottom boards & insulation
Replace or repair steps & rails
Repair wiring install new light fixtures
On Unit #1101 reconstruct living room/bedroom and family room,
Contract Price: $25,000.00
Sincerely,
Q~~. ((J::1~Q
Patricia Davis
Director
PD:pam
Contingency for RCS Emergency Housing
$ 5,000.00
Total Attachment A:
$30,000.00
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3201(J
OFFICE OF MANAGEMENT AND
BUDGET
(Clrcular No. ^-110)
GRANTS AND AGREEMENTS WITH INSTI.
TUTlONS OF HIGHER EDUCATION,
HOSPITALS, AND OTHER NONPROFJT
ORGANIZATIONS
UnifOfm Administrative Requirements
JULY I, 1976.
To the heads of executive departments
and establishments.
Subject: Unlform administrative re-
Quirements Cor grants and other agree-
ment.s with Institutions of hl:;her edu-
ca.tlon, hospItals. and other nonprofit
organlza.tlons
1. Purpose.-This Circular, promul-
gates standards for obtaining consisten-
cy and un1!ormity among Federal agen-
cies in the administration of grants to,
and other agreements with. public and
private InsUtutlons oC hIgher educatlon,
pUbllc and private hospitals, and other
quasl-publlc !lnd private nonprofit or-
ganiul.tlons.,This Circular does not apply
to grant.s, contracts, or other agreements
'between the Federal Government and
units of State or local governments
covered by Federal ManagemenL Cir-
cular 74-7.
2. Effective date.-The standards in
the attachments to thIs Circular will be
applled as soon as practicable but not
later t.han January I, 1977.
3. Supersession,-This Circular res-
cL'1ds !U1d replaces parts ill and IV of
the Appendix to Federal Management
Circular 73-7, Adminlstratlon of college
and unlverslty research grants.
4, Policll inter-t.-The uniform stand-
ards and requirements included In' the
attachments to thls Circular replace the
varyl.ng and often confilctlng requlre-
ments that have been imposed by Fed-
eral agencies as condItions of grants and
other RKreements with recIpients.
5. Applicability and scope.-Except as
proVided below, the standards promul-
gated by this Circular are applicable to
all Federal agencle5. It any statue ex-
pressly prescribes pollcles or specific re-
quirements that dilTer from the stand-
ards provided herein, the provisions of
the statute shall govern.
The provlslons of the attachments of
thls Circular shall be applled to Bubre-
clpients performing substantive work
under grant.s that are passed through or
awarde<1 by the primary recipient it such
Ilubredplents are organizations de-
scribed In par~raph l.
6. Definitions.
a. The term "grant" means money or
property provided In lIeu of money paId
or furnlshed by the Federal Government
to recipients under programs that pro-
vide financlal assistance or that provide
support or stimulation to accomplish a
pUblic purpose, The term "oUler RKree-
ments" does not Include contracts which
are required to be entered into and ad-
ministered under procurement laws and
regulations, Grants and other agree-
ment.s exclude (a) technical assistance
programs, which provide services Instead
of money, (b) assistance In the form of
I
NOTICES
general revenue sharing, Irons, Joe.n
guarantees, or Insurance;; and (c) direct
payments of any kind to Individuals.
b, The term "reclpJent" includes the
following types ol nonprofit organlza-
tlons that are receiving Pederal funds
from a Federal agency or through a
state or local government:
Publlc and private insUtutlons of high-
er education; public and private hos-
pitals: and other quasI-public and pri-
vate nonprofit organizations such as (but
not limited to) community action agen-
cies, research institutes, educational as-
sociations, and health centers.
The term does not Include foreign or
International organizations (such as
agencies of the United Nations) and
Government-owned contractor operated
facilities or research centers providing
continued support Cor mission-oriented,
large scale programs that are Govern-
ment-owned or controlled, or are de-
signed as federally-funded research and
development centers.
7. Requests lor eIcepti.on.s.'-';'The Oroce
ol Management and Budget may grant
exceptions from the requirements of this
Clrcular when exceptions are not pro-
hibited under exlstlng laws.
However, In the interest of maximum
unlformity. excepUoDS from the re-
quIrements of tile Circular will be per-
mitted only in unusual cases. Agencies
may apply more restrictive requirement.s
to a class of recipients when approved by
the Oroce of Management and Budget.
8. Attachments.-The standards pro-
, mulgated by this Clrcular are set forth
in the Attachment.s, which are:
^ttachm~nt ^ Cub depo6ltorles.
Attachm~ntB Bonc1Jng and Insurance.
^ttachm~nt C ~tentlon and cwtodlAJ. re-
qulrem~ntB for reCords.
Attachment D Program Income.
Attachment E Coat sharing a.nd, mAtchIng.
^ttachm~nt F Stand.a.rd.B for DOAncla.! IIlAIl-
a.gem~nt systelI1-",
Attachment 0 Ftn.anclal reportl~ require-
menta.
Attachm~nt H MonItoring and reportlng
prDgTa.m perforoun~.
Attacbment I Payment requlremenu.
Attachment J ~vWon or tlnanclal pllU1A.
^ttachrn~Qt K Cloeeout proce<1urea.
Attachment L Buapenalon and tennlnatlon
procedures.
Attacbm.ent M Btanda.rc1 form for applYing
for federal ......Ist&nce.
^ttachm~nt N Property rw.D"*,,ment lJtAnd-
arcb.
Attachm~nt 0 Procurement 1It&nd.Jr.Nb.
9. EICeptiom lor certain recipUm.ts.-
Notwithstanding the provisIons of para-'
graph 7 it an applicant/recipient has a
history of poor performance, b not fi-
'nanclaUy stable, or Its management sys-
tem does not meet the standards pre-
scribed In the Circular, Federal agencies
may impose additional requirements as
needed provided that such appllcantj
recipient bnoMed in writing as to:
a.. Why the addlUonal standards are
being Imposed:
b. what corrective action Is needed.
Copies of such DotlflcaUow &hall be
unt to the oroce 01 Man.agement and
Budget and other agencIes funding that
recipient at tile same time the recipient.
Is notified.
10. Respon.sibilitie3,-Agencles respon-
&Ible for adminlstering programs that In-
volve grants and other agreements with
recipients shall Issue the appropriate
re6Ulatloru necessary to Implement the
provlslons of thls Circular. All portlom
of such regUlations that involve record-
keeping and/or reporting requlrement.s
subject to the provlslons of the Federal
Reports Act and OMB Circular A-40
must be submitted to OMB for clearance
before being Introduced Into use, Upon
re!luest all regulations and instructions
ln1.plementing this Circular shall be
furnished to t~e Oftice of Management.
and Budget. Agencies shall also deslg.;.
nate an oUiclal to serve as the agency
representative on matlers relating to the
!mplementation of this Circular. The
name and title of such representative
Ilhall be furnished to the Oroce of Man-
agement and Budget not later than Au-
!rUSt 30, 1976,
11. Inquiries.-Further Information
concerning this Circular may be obtained
by contracting the Financial Manage-
ment Branch, Budget H.evlew Division,
Oroce of Management and Budget,
Washington, D,C. 20503, telephone 395-
3993.
JAWES T. LYNN,
Director.
ATT&CB>UNT A.~ct1LA.lI No, ^-110
CAS H DJ:POaITOaIl:.s
1. Thls IIt~hm~nt 6ets forth standards
governing the use of bank5 lLlld ot6e~ In-
stitutions a.5 d~posltorlcs or funds advanced
UDder grants and other agr~emeats,
2. Except lor sltUlltlOIl5 descrIbed In para-
graphs 3, 4, IUl<l 5, no Fl:dera.l llpon.~ruig
~ncy8hL11:
a. ReqU1re phyalca.l segregation o! cash d~-
1>051 torle3 for funcl.a whIch are provided to II
nelpleDt.
b, E"tabllsh IIny eligIbility requr.reme:lts
for c.LSh d~posltor1es for funds which lire pro-
'TIded to a redplent.
3. A 6epa.r&~ bank account shall be require
when applicable l~t~r-or~red1L ag~eemeDt.s
provIde that drawrlowIU wlU be naade wh~n
the ~lplent.'B cbeclu a.re presen:ed to the
bank for payment.
i. Any moneys advanced to II r~clplent
which a.re subject to the contn.1 or ugula-
tlon of the United States or any of Its ot:lcers,.
rgente or employ~' (public money. as d~-
tl.ned 1.0 Treasury Clrcula.r No, 176. a.s
-.mend~d) mU3t be d~poslted In a bank wIth
Federal Deposit ID.5urance Corporation
(FDIC) In.surance coverage and the bal!lnce
exce-e<1log the !"DIC coverage must be col-
btenJly secured,
II. Con8la~nt witb the national go&1 or
expanding the opportunities ror Intnorlly
b\<.5lneil5 enterprLsu, recIpIents and aub-
recipients shall be encour~ect.to use minor-
Ity ban.lta (a bank which Is owned at least 50
~rce~t by m!nor1ty group members).
ATTACHWlI:HT B.-CDll:VLAIl No, A-IIO
.oXDlN co AXO Uf.111lAHCE
:. Thla ..tt~hm~nt ~ls forth bonding and
Insurance requirements ror grants and otber
agr<>em~nte wi th reclplenls. No other bond-
Ing -.od lrusuran~ requlrem~B~ shall be Im-
po6e'd other than thoee normally ~Ulred by
the recipIent,
2. Except a.s oth~rwlR required by la..., a
grant or other a.gn:-emeDt that reqUIres the
contnP.cUng (or subcontracting) for con-
.truC'llon or tactllty Improvementa .baH pro-
T1dl> for L'u z-e<:lplent to follow Its own re-
fEDEVtL UGISTU. VOL 41, NO. 14t--RIDAY. JULY )0, 1976
ItPr/~ , c..,
32018
1
t10ns from nOD-hderal third Parties are "et
forth below:
a, Valuation 01 volunteer "ervfcc!,-Volun-
teer r.ervlCes may be furnished by professional
and teehnlcal personnel, consultants, and
other skilled and unskllletl labor. Volunteer
r.ervlces may be counted as CO!t sharIng or
matching If the service is an' Integral and
nK~ put Of an approved program.
(I) Ratu lor Volunteer !ervice3,-Rates for
volun~rs should be consistent wIth thOtie
paid for similar work In the reclplent's
organlzatlon. In those Instances In which the
requlretl skll15 are not found In the recIpient
organlzatlon, rates should be consistent wIth
tho~ p.Jd for sImilar work In the labor mar-
ket In which the recipient competes for the
kind of semces Involved.
(2) Volunteer" employed by other organl-
zati07u,-When an employer other than the
recipient furnishes the servIces of an em-
ployee. these e.ervlc~ shall ~ valued at the
employee's regular rate of pay (exclusive of
frln~ebenetH.s and overhead costs) provIded
, these services a.re In the same slt11l for whlch
the employee Is normally paid.
b. Valuation 01 donaled, expendable ~r-
.onal propertv.-Donated, expendable per-
sonal property Includes such ItelIU as ex-
pendable equipment, ornce suppIles. labora-
tory suppIles or workshop and clauroom
supp!les, Value ~ed to expendable per-
&OnaJ property Included In the cost or match-
Ing share shOUld be reasonable and should
not exceed the lDuket vaJue of the property
'at the time of the donation.
c, Valuation 01 donated, none:rpend<Jble
~scmai propert]/, buildings, and land or
we thereo/.
(1) The method used tor chargIng cost
sha.rlng or matchIng for donated nonex-
pendable ~rsonal pro~rty, buildIngs and
b.nd may dllTer according to the purpot,e or
the grant or other agreement e.:l (ollows:
(a) If tbe purpor.e or the grant or other
&gnement 15 to assist the recipIent In the
a.cqulsltlon or equipment. buildings or land,
, the tou.! vaJue of the donated property may
be claImed as C06t sharing or matching.
(b) If the purpo.s.e of the agreement ls to
support activities that require the use or
equipment, bull dings or land. depreCIation
or ~ charges forequlpm~nt and buildIngs,
. may be made. The full value of equl!lment or
other capital ~ets alld faIr rent~l charge3
for l&nd may be allowed provIded that the
Yederal agency has approved the charges.
(2) The. value of donated property wlJ1 be
determined In accordance with the uaual
a.ccountlng pollclC1l of the recipient with the.
.following qualifications:
la} Land and buf/dlng".-The value ot
dona~ land and buildings may not,exceed
Ita f"lr mark~ value. at th~ time or donation
to the recipIent as established by an Inde-
~ndent appraIser (e,g., certlfietl real prop-
erty appraIser or OSA representatives) and
cutlJ1ed by a re~ponslble omclaJ or the
ret:lplent..
(b) N~~nd4ble per!onal ~ptrt]/,-
The v,.lue of donated nonexpendable personal
property shall not exceed the talr market
value of equipment and property or the same
age a.nd condition at the time of donation.
(c)' Use 01 space,-The value of dona.~
space aha.1I not exceed the faIr rental vah.:e
of compo.rable spa.ce 8.." established by an
Independent appraisal of companble space
and facilities In a prlva.tely-owned building
In the !.ame locality:'
(d) Loaned equlpment,-The value or
loaned equipment shall not exceed Its fair
rental value,
6, The following requirements pertain to
the reclplent's supporting records for In-
kind contrlbullolLS from non.Pederal thIrd
puttes,
1. This attachment pre&erlbes stanc1Ard.. for
financial management systems of ret:lplents.
hderal sponsorIng agentles shall not 1mJ>08~
add I tlo'nal standards on reclpien ts unless spe-
clfiCally prOVided for In the applicable sta-
tutes (e,g" the Joint Funding Blmplltlcatlon
Act, P.L, 93--510) or other attachmenta to thIs
circular. However, Pedeml spon.sorlng agen-
cies are encouraged to make 8~tlOns and
assist recipients In estballshlng or Improving
llnanclal management systemB when lIUch as-
sistance is needed or requested.
2. Recipients. financl.a1 IIULD.&gem.ent rsy...
tems "hall provIde ror:
a. Accurate, current and compiete dl.aclo-
sure ot the llnanclal resull.8 of each federally
sponsored project or program In accordance
with the report.lng requlremenl.8 :l<!t forth In
Attachment 0 to this circular. When a Ped- 1. This attachment prescrIbes un!form re-
eral sponsoring agency requires reporting on porting procedures tor recipIents to: sum-
an a.ccrual basis, the recipIent shall not be mar1ze expend.1tures made and Federal tund&
required to establish an accrull.1 aceountlng unexpended for each award. report the 8ta~\l,8
sratem but shall develop such accrual data of Federal cash advanced, request ad'l8:lce:s
for Its reporl.8 on the ba.sls or an ana.IylIta ot ..nd reimbursement when the letter-or-<:redlt
the documentation on hand. method Is not ~; and promulgates slAl:1d-
b. Records that Identlry adequately the ard forms Incident thereto.
source and appll~t1on of tunWl for federsJly 2. The followlngdetlnltlona apply for pur-
sponsored activities. Tbeee reconls ah.all con- pce.es of this attachment:
laIn Information pertainIng to F'ederal .. Accrued ezpendltureJ.-Accrued ex-
awarda, authorization:!, obligations. unobll- pendltures aN: the chargeS Incurred by the
gated balances, e..s&el.8, outlaYll. and Income. recipient during a given period requiring the
c. EtI'ectlve control over and a.ccountabUlty provisIon of fi.mc1a for: (1) good.s and other
tor all runds, property and other ~t6.R.e- langll?le property received: (2) services ~r-
clplents ahall a.deqUAtely safeguAJ'11 all such. formed by employees, contractors, eubreclpl-
assets and shall aasun thAt they are used ents. and other payefS. ILnd (3) other
801ely for authorIzed p~elI. ..mounts becoming owed under progTllOlS for
d. Comparlson of actUAl ouUaya with bud- wh1cb no current serv1c"",, or perrormance Is
get amounts for each gnult or other agree- required.
ment. Whenever approprtatot or nqulnid by b. Accrued inc<>>7\e.-Accrued InUlme is the
the Pederal sponsoring agency, n.n.a.nclal 10- lIum of (1) ea.rnlhgs during II. gIven ~riod
tormatlon ahould bp relatec1 to performance from (I) services ~rrormed by the reclpl-
..nd unIt coet d.ata. ent: and (11) goods and other ta.nglble
e. ~urea to mlnlm1M the time elaplllng ~ property delhered to purchasers: and (2)
between the tf"ltoD&fer or fund& from the U.s. 1UD0unl.8 becoming owed to the rKlplent for
Tnasury and the d1abul1M'ment by the reclp- "'hll<.h no cunent services or performance Sa
lent, wheneVllr tunda a.nI advanced by the roqulred by the recipient. .
Federal Government. When a.dn.nces are . c. Federal fu~ GuthorUed.-Federal
made by a letter-<Jr-cred.1t method, the reclp- funds authorized are the total amouot ot
lent &ball m.a3te drawdowna ... c10ee U poa- 7'e<1eral tunda obligated by the Fetleral Gov-
alble to the time or ID&i1ng d1abumementa. ern.ment tor \Ue by the recIpIent. This
t. ~urea for detennlnlng the ~n- 1UD0unt nay Include any authorlz.e<l carry-
ableneu. allowablUty and aUocabU1ty or coeta over of unobligated fund& from prior 1iscsl
10 a.ccordance wIth the provisions or the ap- years when ~nn1tted by law or agency
pllcable Federal ccst principles and the tenna regulation.
or tbe grant or other agreement.. d. In-kind contributio7U,-In-klnd con-
g. ^~UDtlng ~ that are IlUpported trlbutlona e.re detlned 10 Attachmeot E to
by source documentaUon. thJ.s circular.
h. Examlnatlona In the form or audlta or e. Oblii/otloru.-obllgatlons are the
Internal audIta. Such audll.8 IIhalI be m.ad~ amounts of orders placed, contracts and
by qualified Indlvldtala wbo aN! IJUmclent1y grants awarded, services received. and slml-
Independent of thoee who authoru.e the ex- tAr transactions during a given period. that
~ndlture or Federal funds. to produce un- w1lI require pa)"lDent by the rKlplent during
bls.aed oplnloD3. conclusions or Judgments. the &ame or a future period.
They ahall meet the Independence cr1ter1.a r. OutlaYJ,-QuUo.ys or expenditures repre-
along the lIne50r ChapleT 3. Part 3 or the ~nt chargr:ft made to the project or program,
V,S. General Accounting omoe publication. They may be reported on a cash or accrual
Standard~ for Audit or Qovernmental Org1U1- ~Is, Yor reports prepared on a cash basts.
l%AlIons. Programs, ActlvtUr5 and Functions. outlays e.re the sum or actUAl cs.sh dlsburse-
These examinations are Intendetl to a&:er- menta ror dlrcct charges for good5 and serv-
taln the elTectlveneS9 or the nnanclal D1aD~ Ices. the amount of IndlrKt ex~nse chl\rj!ed.
agement ayatenu and Internal procedUN:S' the V1llue of In-kInd contrIbutions applied.
that have b~n established to m~t the !emu and the amount of cash advanc~ and p"y-
and conditions of the agr~ments. It Is not menl.8 made to sUbrKlplents, }'or reports pre-
Intended that each lLlt"eement awarded to the paN'd on an accrual blub, outla)''S are the
recipient be examined, GeneJ'1\lIy, examlna- aum or actual cash disbursements for dlrt'Ct
tlonS should be conducte<l on an organlza- charges for goods and services. the amount
tlon-wlde basLJ to test the fbcal integrity or or lodlrect u~lUe Incurred. the niue, of 10-
NOTICES
.. Volunteer service:! must be documented
and. to the extent feasible, supported by the
same methodS used by the recipIent ror Its
employees,
b. The be.sls ror de~nnlnlng the valuation
ror ~rsonal Bervlces. mllterl.J, equipment.
bulldlngs and land must be docuaunt4!<1.
A'rTACIIMEUT F.-<;DtcVL.U No. A-ll0
BTAKDAlU>S rOIl nNANClAL MANACJ:W%HT
aYSYZus
I
t1nanclal tran.sactlons, M well as compllaoce
with the ternu and conditions of the Fede",1
gTanl.8 and other agreements, Such tes:a
would Include an approprIate &a1Il"UDg of
Federal agreements. Ex.amlnatlon.s w111 be
conducted wIth reasonable frequency, on a
continuing ba.sls or at scheduled Interva!s.,
W1ually annually. but not le&I t~quently than
every two years, The rrequency or these ex-
aminations shall-' depend upon the nature,
Illze and the complexity or the actvUty, TheY!:
eXAminations do not relieve Pederll.1 .gencl~
or theIr audit responsibilities, but nay street
the frequency Bnd 8CO~ of such audits.
1. A systematic method to assure timely Bnd
appropriate resolutton or audit llndlnga a.nd
recommendations, '
3, Prlme.ry reclplenl.8 shall requlre subre-
clplents (as defined In paragTllph 5 or th&.
basic circular) to adopt the sUndud3 In
paragraph 2. above except for the require-
ment In subpa.ragraph 2e. regarding the usd
of the letter-<Jr-credlt method aod that part
ot subparagTllph 2&, regarding reporung
forms and frequencies prescribed In Attach-
ment, G to this cIrcular.
ATTACHMeNT G.--Cmcut.A.a No. A-ll0
nN AN CIAL 1U:P0f\'TD'ro . J:QO 1& 001 z:>n1I
FEDUAL nGlsnt; VOL 41, NO, 14t-AIDAY, JULY 30, 1976
/1;JP C
ArrAe:HME~ H,-CI~Ctl1.A~ No, A-IIO
MONrT'OR1NG ^NO REPOl\TINC PROCRAM.
POlroRMANCJ:
1. This attachml!nt seu forth the pro:.ce-
dures for monitoring and reporting program
perCorml\ncl! oC rcclpll!nts.
2. Reclplenu shall monItor the pl!rfOrmaDce
undl!r grant.s Ilnd other agreements and,
where appropriate, ensure that time sched-
ules are being met. projl!cted work units by
time perlorts arl! being accomplished. and
other performance goals are beIng achieved.
ThLs review shall be m.-de Cor each program,
Cunctlon. or activity at each agrl!l!ment IU set
torth In the approved application or ""ward
document,
3, Recipients shall submit a performaD~
report (technical rl!port) Cor each a.greeml!nt
that brleny presl!nts the Collowlng Informa-
tion Cor each pro;;ram, functIon, or activity
Involved a3 prescribed by the Federal spon-
soring agency:
a, A comparison oC actual accomplishments
With the goals es:abllshed Cor the period, the
nnclngs oC the Investlga~r, or both, If the
output of programs or projects can be readily
quantified. such quantitative data should
be related to cost data Cor computat~on oC
unIt costs, .
b, Reasons why established go!l.1s were not
met.
e:. Other pertinent Intormatlon Including.
when appropriate. analysis and explanation
oC cost overruns or hIgh unit costs,
4, E;xcept IU provided In a and b below.
and In subparagraph 3a( I). Attachment G.
recipients shall submit the perCormance or
technical re,lOrts to Federal sponsorIng a.gen-
cl~ and the Financial Status Reports cov-
ering the sal':le period In the Crequency estab-
lished by At:achrnent G oC this Circular and.
'W'!1ere aPFoprlate, a nnal technIcal or per-
formance report after compJetlon of the
project on a date specified by the Federal
sponsorIng a~ency. The Federal sponsoring
agency shall prescribe the frequency wIth
which the performance report.s will be sub-
mltte<1 With the request for advance or reim-
bursement when that Corm Is uoed In lieu
of tho FInanCial Status Report. Except a3 pro-
vided Cor In paragraph 5 below, perCormance
reports sh..lI not be required moro frequently
than quarterly or leM frequently than an-
nually. Federal sponsorIng agencIes may
waive the requirement Cor recipients to sub-
mit pertormance reports with the nnancla.l
reports under the folloWing circumstances:
a, When the recipient Is requIred to sub-
mit a perCormance report With a continua-
tion or renewal application.
b. When the Federal sponsorIng agency de-
termInes that on-site technIcal Inspections
and certlned cOl:'!:>letlon dat~ will 'be BUm-
dent'to evalua:e constructlon projects.
c. Vv'hen the Federal B;>Of13orlng agency re-
quests annual nnanclal reporu on a nscal
year basis but It Is necessary to get annual
prcgresa reports on a e:alendar year basis,
6. Between the required performan':e re-
porting dates. events may occur th3t have
slgnlncant Impl'ct upon the project or pro-
gram, In such Irutancl!S, the recipIent sh!l.lI
Inform the Federal sponsoring agency a3 soon
..... the COllowlng types oC conditions become
known:
a, Problems. delays. or advene conditions
that will mat<!rlally art'ect the ablllty to at-
tain prcRram objectives, prevent the meet-
Ing oC time schedules a.nd goals. or preclude
the attainment ot project work unl,", by es-
tabllshed time perlo<b, ThLs disclosure shall
be accompanied by a statement ot the action
taken, or contemplated. and any Federal a..s-
slslance needl!d to re301ve tho situation.
b, Favorable developments or evenu that
enable time schedules to be met sooner than
I
NOTICES
~
I
'--.....
anticipated or more work unIts to be pro-
duced than originally projected,
6, It any percormance revle'''' conducted
by the recipient discloses the need tor change
In the budget estimates In accordance with
the crIteria. established In Attachment J Co
this Circular. the recIpIent shall submit a re-
quest for budget revisIon,
7. The Federal spoll5Orlng agency shall
make sIte vlslu lIS frequently &.'l practIcable
to:
a, Review program accomplish menta and
management control systerIl3, and
b. PrO\'lde such technical &S5lstance as
may be required.
8, Federal sponsoring agencies shall submit
proposed technical and perrormance repor:.s
to the omce oC Management and Budget for
approval In accordance with the report clear-
ance requirements oC OMB CIrcular No. A~O
as revised.
ATTACHMEI"T I,-Cmct1L.U No. A-lID
PATMJ:NT IIEQUIilJ:MUfTS
1. This att!LChment estabHshes the re-
quIred methods oC making payments to recip-
Ients, These methods wlll m!nlmlze the tlme
elapsing between the dlsbunement by the.!ll!:
recipients and the transfer oC funds Cram the
UnIted States Treasury to these recipients
whether such disbursement occurs prior to
or subsequent to tbe transfer oC funds.
2. Paymenu can be made to recipients
through a letter-oC-credlt, an adv.:mce by
Treasury check, or a reimbursement by Treas-
sury check. The following dennltlons apply
for the purpose ot this atta..c:hment:
a. Letter-o/-Credlt,-1I, letter-of-credlt 13
an Instrument certltled by an authorized om-
clal of a Federal sponsoring agency that.au-
thorlzes a recIpient to drs.w Cunds when
needed Crom tbe Treasury, through a Fed-
era.l Rl!serve bank and the reclplent's com-
mercIal ba.nk, In accordance with the provi-
sions of Treasury Circular No. 1075, e.s re-
vised.
b, Ad\Xlnce by TreCJ..!ury check.-An ad-
vance by Tre!\sury check Is a ps.yment made
by a Trea3ury check to ll. recipient upon Its
request before outlays are made by the
recipient, or through the we of predeter-
mined payment schedules.
c. Relmbur3ement by Treo.sury chec7c.-A
reimbursement by Trea3ury check 15 a Treas-
ury check paId to a recipient upon requl!!lt
for reimbursement from the recipient.
3, Except Cor corutructlon grants and
other con5tructlon agreement., for which op-
tional payment method.s are authorized, M
described In paragra.ph 5, tbe letter-of-credit
method shall be wed by Federal sponsorIng
agencies If all oC the foll07l1ng condltlona
exIst:
a. It there Is or wlll be a contlnuln;t rela-
tionship between a recipient and a Federal
spcnsorlng agency Cor at least a. 12-month
period and the total amount of advance pay-
ments expected to be received wIthin th!l.t pe-
riod from the Federal '!'pollJlOrlng agency ls
$250,000 or more. as prescrIbed by Trea.sury
Circular No. 1075, For JoLnt funded projects
the Treasury hM authorized a dollar crlt<!rla.
of $120,OO<i. '
b. ic the recipient has established or dem-
onstrated to the Feder&! sponsoring agency
the wllllngneM and ability to ma.lntaln pre>-
cedures that Wlll mlnlmlz.e the tIme elaps-
Ing between the tranllfer OC funds and their
disbursement by thlt reclpl,nt.
c. It the recipient's nnanclal management
system meets the standllords for Cund control
and accountability prl!.3Crl!>ed In Attachment
P to thls Circular, "Stand..rd.s for FInancial
Management Systems,"
4, The method OC ..dvanelng Cunds by
TrelLSury check shall be used. In accorda\1ce
with the provIsions ot TrelLllury Circular No,
1075. when the recipient meet.s all of tbe re-
quirements speclned In paraJraph 3, above,
except tho!e In subparl1<;raph :la,
5, The reimbursement by TrelLllury cbeck
method shall be the preCerred method It the
recipIent doe, not meet the requirements
speclned In subparagraphs :lb and 3c, above.
At the option oC the Pederal sponsoring
agency, thIs method may al~ be used on ..ny
co:!structlon agreement. or H the major por-
tion oC the proglam Is accomPllshed through
prIvate market nnanclng. or Feder&! loans.
and the Federal assistance. constitutes a
minor portion oC the program. When the re-
Imbursement method b wl!d. the Pederal
sponsoring a~ency shall malte payment
withIn thirty days atter receipt of the billing,
unless the billing Is Improper.
6. When the letter-oC-credlt procedure Is
USl!d. the recipient shall be Issued one con-
so\!dated letter-tif-credlt whenever pOSSible
to CO'ler a!1. tlclpated cash needs Cor all granu
and o:her aitreements awarded by the spon-
sorIng agency, Ukewlse, to the extent po!sl-
ble. when the advance by TrelUury check
method Is used, advances should be clln-
so\!dated (pooled) Cor all grants and other
agreemen t.s made by the sponsoring agency
to that recl;>lent, .
7. Unles:; otherwise required by law, Fed-
eral sponsorIng agencies shall not wIthhold
paym~n~ ~or proper charges made by reclpl-
ent.3 at aroy time durlng t!1e project or pro-
ll;ram perIod unless (a) a recipient has failed
to comply -..-Ith the progr~m objectIves, award
condItIons. or Federal reporting reqUIre-
ments: or (b) the recIpient h Indebted to
the United States, and collectlon or the b-
deotedness will not Impalr accomplishment
or the oo;ectlves or a project or program
sponsored ~y the United State.s,
Under such condltlo:'!s, the spon50rlng
agency miloi'. upon reasonable notice. InCorm
the reclp!e:1t that paj-me::ts will not be m..de
Cor cbl!gat:ons Incurred a!~er a speclned dat<!
until the condItions are corrected or the In-
deotedness to the Federal Government ls
llquldate<1,
ArrACH:l<Il:NT J,-CD<ct.:L.U No. A-110
ItrVlSlON oF' 7INA~e:UL PLANS
1. This attachment se!.s forth criteria and
yrOCedures to be follow~ by Peder..1 spon-
soring agencies In requiring reclplenu to re-
pon 'deviations from nns.tlclal plans and to
req uest a;lprova.b for nnanclal pl..n re-
vIsIons.
2. The ~nanclal plan Is the tlnanclal n-
.pre5Jllon of the project or program as ap-
proved during the application and/or a""ard
proce~. It may Include either the Pederal and
non-Federal ehare. or only the Federal11hare,
d~pendlng upon spollllorlng agency requIre-
ments, It should bCl rela:.ed to performAnce
Cor pro~3.-'n evaluation purp~s whenever
approprla:.e and required by the Feder&!
sponsor:r.g agency,
3. For non construction awards, reclplenta
thall Immediately request approvals trom
Fe:1eral sponsoring agencIes when therl~ Is
re:l30n to believe that within the. next a~yen
days a revision will be necessary for the
follOWing rea.soru:
a. Che. nges In the sco~ or the obJectlre oC
the project or program,
b. The need tor ..ddltlonaI Federal fund-
ing.
c. The transfer of amounts budgeted fcr
IndIrect c~ts to absorb Increwes Indirect
C03U or vice versa, l! approval Is required
by the Fe<:!eral sponsorlr>ii: agency.
d. The l!xpendlture.s ..... reGulre approval In
accordance with FMC 7J-S. "Cost Prlncl:lles
Cor Educa:lonal Instltullons," For all other
awards. approval reQulremenu ror other
Item, oC expenditures may be Imo05ed If they
are consIstent with tho.e In FMC 7J-S, No
other requirements for speclnc Ite~ msy be
fEDUAL REGISTU, VOL. 41, NO. 14S-fRIDAY. JULY 30, 1976
.
---....... -... -"_.
;qf'f-' c..
bur3M>le contr...ct.., purc':\lLSoe ordent. Incen-
U,e contracta, shall be determlDe<! by Ole
recipient but rnu...t be a.ppc-oprla.te foc the
partloul..r procurement and for promoting
U\e be.~t Inter...t of the progrlLln Involved.
\he "cost_pIUJ.a-pe~nt...ge-of-c.06t" meUl-
.d of contracting sh&lI not be w.ed.
(5) Oontrl>Cts shill be made only with re-
spolulble contractors who ~ Ule po-
t.entlonal ..blllty to perform suc:ce.;.o;fully
under the t.eruu e.nd condl!..lons of & pro-
pooe<! procuremen~, C<>=lder&UoD shall be
given to such ma.ttem as cont.ra.ctorlnt.egTlty,
record of pa.:;t performAnce. nnanclal and
te<:h nlCOII re.MlUlces oc accOOJl bill ty to other
Dec~y resouree3,
(6) All propOS<!:d sole BOurce contract.. or
where only one bid or propo:s.a.l L~ received
In which the ~te expendlt.ure 13 ex-
pec~ to uceed ~.OOO 6haJI be subject to
p:-Ior e.pprovAI J.t the dl.screUnn of Ule Fed-
eral ,pon:JOrlo.g "itency.
(7) Some form of price or CQ8t lUlalT'1s
6hould be m&<1e In connection with every
pTOCurement It.CUon, Prtce a.na.lyalJl may be
a.ccompll.5hed In v.rloUA W~7:i. Including the
comp&rl80n of price QUDt&UOD5 suOfilltted.
me.rket price' r..nd similar Indlcla, together
wiUl ~unts, Co6t a.naJy&13 \.s the review
&nd ev&lu...tlon or each el=ent or co.,-t to
detennlne r~na.blen_. alloca.blllty and
aJlowa.bUl ty,
(8) Procurement reocml.a and ~1"" for pur-
ch...,." In eX'Ct6S Or tlO,OOO &hall Include tha
101l0,,1ng'
(A) ,Ba<o19 for contn.ctor &election'
(b) JustlQc&tlon ror l...ck or co'mpetltlon
,,",'hen compeUtlve bleb or oll'ers l\Te not
obtained;
(c) Ba.&\3 ror &wa.r11 C()lIt or pTlca,
(9) A 6)"5t..m for contract :>dnUn\.stratlon
Mall be rr..AJntaJned to en.sure oont.ractor
conCormance with t.ernu. condltloru and
a~clncatloru o( the contre.ct, and to eD3ur1l
e.1"qu.,.~ and Urnely lollcnro.;> 01 all pur-
che..ses,
4, The ~clpl~t ah..1I IneluGe. In a.ddltlon
to pnH'~lons to Cellne e. l50UDd &nd complet.e
, e.;rreement, tbe rollowing prorulo"" In all
contrACts, TtLe-se prov13lons abAll al:lO be e.p:
plied to sutx:ontre.cb.
a. ContN.ct.s In excet\S or UO,OOO Ilh8.ll con-
taIn contl'l\CtUAl prov13lorul c:c oondlUona
th..t wlll ..110'01 ror &dm.Inltrtl1lUve. contn.c-
tu,.1 qr legal r<>m~"" In ln5tanc"", In ....-blch
contractor' vlol..t<o or b1-eacll oontx&et ~
and provide lor such rem.e<1I&1 actions ~
rru. J be a ;>propr1 & tAl,
b, All contre.ct.. 10 excesa or $10,000 IlhAlI
cono..ln sult.\.ole proVlslOlU fO!' t.enn1ru.tlon
by the rectplent lncludlng the nu.nne!' by
which l.ermln&Uon will be elTe<:t.ed ~d the
bas13 for settloment. In ..ad It Ion. SUM oon-
tract.s shall describe cond1tloD5 under which
I
NOTICES
,
t10DA (29 CPR, Put 5), Under a.eetlon 103
of UUI Act, each cont..ract.or ab,",1 be re-
quired to compute the w"1lea of every me-
chanIc and labonr on the bo.alll or .. au.nc1.ard
work day or 8 houn and a at&ndard work
week of 40 houn. Work In exces.s or the
eu.ndard....orltd..y or ...orlt'Oleek-b permllOSlble
provided th.t the worker l.J compeD3A~ at ..
rate or not I~ than 1'h Urnes tbe ba.slc
r&t6, of pay lor ..11 houn worll.~ In excess
of 8 houn In ..ny calendar day or ~ hours
In the workweek. Beetlon 101 or tbe Act III
..ppllce.ble to colUtructlon worle t.nd provlde1
th..t no laborer or mechanIc shall be required
to Vlork In aurroundln6' or under workIng
condltloru which are uIlSAoltuy. h..zardou5
or da.ngerous to hb health t.nd &afety as de-
termined under con.structlon ul~t, and
he<h lIund&rd3 promlllg&t..ed bytbe Secre-
t..ry 01 Labor, The,;" requirements do .,.ot
apply to the purch....es o! supplles or ma:e-
rials or artIcles ordinarily ava:Jaole '>0 the
open market, or contract.s (or trlr.nsp'.(~atlon
or transmlMlon of Int,IlIKence.
h. Contncts or a;(reements. the prinCipal
pUrp06e ot which Is to create, develop or lm-
prove prod '.lcts. proces.5e~ or metbod'; or lor
exploratIon Into neltb th&t dlrectlv concern
public heeJth. ~!ety or welC&re; or'r:ontr!locts
10 the neld of science or ~hnCllogy In which
tbere h&3 ~n little signIficant experIence
outsIde or worle lunde<1 by Pedenl ~tst.
ance-. shall contain a notl~ to the e/Tect that
matten .r~dlo.g rIghts to Inventions Uld
m..t.erta15 g~ner..t~ under the contr~ct or
a.greement are 6ubJect to the regul..tloru. u-
aued by the F'tderal sp<lllsorlnif agency and
the recipIent. The contractor sha:! be ad-
vised Il.S to the BOurCll of ILddltlonal InCorm..-
tlon ro.gllJotng th~ mAtt.el5,
l. All negotl&t.ed contraol!l (except those
of tiO.OOO or leM) e.w&rded by re"'plents
sh..n Include.. provl.lllon to tbe eC'ect that
the recIpient. the P!>deraJ spoO$Orlng agency.
the c<>mptroller ~neral or the UnIted St&t.ea
or ..ny of otbelr duly e.uthorlze<1 represe:>t&~
tlv"",. ah.aJ1 h.ve ac~ to any book". dlY.u-
menlA. pa~l"8 and recorda or the contrA', lor
which ....~ directly ~rtlnent ta a speclnc p~o-
gr&D'1 tor tile purpo~ or ma1<lng a'.ldlta,
examln..UoIU, excerpt.. and transcrlptlor.3.
J. C<>ntn.ct.a a.nd subgnt>t.~ or ..mount:. In
eXceM or 1100,000 ah&ll contaIn a p~v;!5lon
th..t l"qul..--es the rec:1plent to agree to com-
ply with all applicable et.anda.rds. orde~s or
regutatlO:l5 l.s.sue<1 purau..nt to th~ Clear Air
Act of 1970 ("2 UB,C, IM7 et aeq.) and the
r..denLl W...t.er Pollution Conlrol Act f 33
U.s,C. 12.51 et seq,) as e.mended, Vlolatlor.s
ahall be reported to the Federal sponso~lng
a$(1!ncy and the Regional omce or the ED"
vlronment..t Prote-ctlon Agency.
IP'R Doc.7~219Ot Filed 7-29-78,8:45 am}
"OUAL U<mnll, VOL 41, NO. 141---1!lIDAY, JULY 30, "T~
Ole OODtra.ct m.o.y be unnln..ted ror de1'ault
IU weU e.s oon.dltlOIU where the conr..ra.ct. m..y
be t.ermln..ted~"'s.e o( oln:wn.slAncea be-
yond the control o( th" 00 n b'...c tor.
c. In all contracts lor constru~tlon or r..-
cUlty improvement alVlU'ded loe more th..n
.100,000, recLplent.& shall obr...-ve the bond-
Ing requlrem=ts pronded In AtlAlclun.ent B
to this cln:uLa.r.
d, A11contra.ct8 ...waN1ed by N>C\;>lent.. a.nd
their cont.raotou or sub;iTant.ee.s h.>.vlng a
value or mono than UO.OOO, 3ha.\1 cooteJn ..
p:rovl.sIon requlrln& complt.&nce with Execu-
tlve Order 11246, enUtle<! "Equal Employ-
ment. Opportunity:' .... lUDended by Executive
Order 11375, and 8.3 supplemented In Depart-
ment or La.bor regulations ("'1 CYR, Part 60).
e, All contracts and subgrants In excess or
12.000 ror constructlon or repair awarded by
recipients and subreclpleou. shall lnclude a
provIsion ror compllance with the Copeland
"Anti-KIck l\Ack" Act (18 U.S,C. 874) &.&
eupplemented In o..partment or La.bor
regulatlollS \29 CFR. Part 3). This Act pre>-
vtdea that ea.ch conlr~tor ot' 6ubgnm~
shAll be prohibited trom Inducing. ::'y any
me&D3, ..ny person employed In tbe construc-
tion, completion, or repaIr of publlc work. to
give up any part of the compens1lotlon to
which he Is otherw\3e entitled. The recipient
ah&ll report ..11 Bwpected or reported viola-
tions to thl! Yederal Spol13OrlDg agency.
f. Wllen required by the ?ederal progra.m
leg1elatlon, all COtl3tructlon contracts
awarded by tbe recIpients &od 6ubreclplenta
or more the.n 02,(!()() ahallloclude a provIsion
tor compliance with the Dav\3-Bacon Act (40
U.B,C. 276.. to &0-7) and M Bupplemen.~ by
~p!lol'tment or ~bor regW&tlon5 (:29 CPR.
Part 5). Under this Act contraelors sh..U be
required to pay WlLges to le.borers and me-
ch:l.lllca at e. rate not le$ll than the mInimum
we.ges epeclned In a waite determ1oatlon mJ.de
by <the Secretary or LAbor. In e.ddltlon, con-
tractors Ilhall be required to pay wages not
leas than once ,. week. The recIpient ehall
place a copy or the current preval:lng wa.ge
determlnstlon lMued by the Department of
Lsbor In each aollclu.t\on t.nd the awe.rd
of ,. contr&Ct ahalt be condl.tloned upon the
accept&nce of the w&ge determination. The
tl!Clplent shall report all awpect.ed or re-
ported vlolatloIU to the r..deral BponwrtOg
agency.
g. "'''bere appllc!loble. all contract.s a....SIded
by tl!Clpleots in eXCe83 of 82,000 tor construc-
tion cootrscta r..nd In exCUll or ,2.600 ror
other contn.cts th&t lnTolve the employment
of mechanics or labonora, shaUlnclude a pro-
vlAlon tor compllan~ with aectlons 103 and
107 of the Contrll.Ct Work Hours and Safety
BtAnd!lol'd.a Act (40 UB.C, 327-330) as sup-
plemented by Department or La.bor regul..-
I}Pr> L
I
,
METHOD OF PA'0fENT
All payments shall be on a reimburse~ent basis only.
All requests for reimbursement shall be su?ported by proper i~voices,
payrolls, checks, receipts and other documentation as requested.
Any program income shall be submitted to the CITY through the
DEPAR~NT at least quarterly. Fees collected, if any, shall oe re?orted
but are not to be construed as progra~ income,
Requests for rei~burse~ent shall not be reduced by any pro~r2w income
received.
D-1
I
SECTION 3 CLAUSE
,
THE FULLOWING SECTION 3 CLAUSE SHALL lJE INCLUDED IN ALL CONTRACTS FUR WORK IN
CONNEcrION WITH A SECTION 3 PROJECT:
A. The work to be performed under this contract is on a project assisted
under a program providing direct Federal financial assistance from
the Department of Housing and Urban Development and is subject to the
requirements of Section 3 of the Housing and Urban Development Act of 1968,
as amended, 12 U.S.C. l70u. Section 3 requires that to the greatest extent
feasible opportunities for training and employment be given lower income
residents of the project area and contracts for work in connection with the
project be awarded to business concerns which are located in, or owned in
substantial part by persons residing in the area of the project.
B. The parties to this contract will comply with the provisions of said Section 3
and the regulations issued pursuant thereto by the Secretary of Housing and
Urban Development set forth in 24 CFR, and all applicable rules and orders of
the Department issued thereunder prior to the execution of' this contract. The
parties to this contract certify and agree that they are under no contractural
or other disability which would prevent them from complying with these
requirements.
C. The contractor will send to each labor organization or representative of
workers with which he has a collective bargaining agreement or other contract
of understanding, if any, a notice advising the said labor organization of
workers' representative of his commitments under this Section 3 Clause and
shall post copies of the notice in conspicuous places available to employees
and applicants for employment or training.
D. The contractor will include this Section 3 Clause in every subcontract for
work in connection with the project and will, at the direction of the
applicant for or recipient of Federal financial assistance, take appropriate
action pursuant to the subcontract upon a finding that the subcontractor is
in violation of regulations issued by the Secretary of Housing and Urban
Development, 24 CFR. The contractor will not subcontract with any subcontractor
where it has notice or knowledge that the latter has been found in violation of
regulations under 24 CFR, and will not let any subcontract unless the
subcontractor has first provided it with a preliminary statement of ability to
comply with the requirements of these regulati~ns.
E. Compliance with the provisions of Section 3, the regulations set forth in 24 CFR,
and all applicable rules and orders of the Department issued thereunder prior to
the execution of the contract, shall be a condition of the Federal financial
assistance provided to the project, binding upon the applicant or recipient for
such assistance, its successors, and assigns. Failure to fulfill these
requirements shall subject the applicant or recipient, its contractors and sub-
contractors, its successors, and assigns to those sanctions specified by the
grant or loan agreement or contract through which Federal assistance is provided,
and to such sanctions as are specified by 24 CFR 135.
'/?PPFNDI^. E-l
I ,
NOTICE OF REQUIREMENT FOR AFFIRMATIVE ACTION
TO ENSURE EQUAL EMPLOYMENT OPPORTUNITY
(EXECUTIVE ORDER 11246)
1. The Offeror's or Bidder's attention is called to the "Equal Opportunity
Clause" and the "Standard Federal Equal Employment Opportunity Construc-
tion Contract Specifications" set forth herein.
2. The goals and timetables for minority and female participation, expressed
in percentage terms for the Contractor1s aggregate workforce in each
trade on all construction work in the covered area, are as follows:
A. Goals for Female Utilization, All Trades:
AREA COVERED
Goals for Women apply nationwide.
GOALS AND TIMETABLES
Timetable
Goals
(percen t)
From Apr. 1, 1978 until Mar. 31, 1979.... 3.1
From Apr. 1, 1979 until Mar. 31, 1980. . . . 5.1
From Apr. 1, 1980 until Mar. 31, 1981. . . . 6.9
B. Goals for Minority Utilization:
TAMPA-ST. PETERSBURG, FLA., AREA
Area covered: Hil1sborough, Pasco, and Pi~e11as
Counties, Fla.
Goals and Timetablesl
Trade
Goal
(percen t)
All......................~...
17.9
1For the life of the project.
These goals are applicable to all the Contractor1s construction work
(whether or not it is Federal or federally assisted) performed in the
covered area.
The Contractor1s compliance with the Executive Order and the regulations
in 41 CFR Part 60-4 shall be based on its implementation of the Equal
Opportunity Clause, specific affirmative action obligations required by
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the specifications set forth in 41 CFR 60-4.3(a), and its efforts to meet
the goals established for the geographical area where the contract
res)Jl ting from this solicitation is to be performed. The hours of IIlinori ty
and female employment and training must be substantially uniform throughout
the length of the contract, and in each trade, and the contractor shall
make a good faith effort to employ minorities and women evenly on each of
its projects. The transfer of minority or female employees or trainees
from Contractor to Contractor or from project to project for the sole
purpose of meeting the Contractor's goals shall be a violation of the
contract, the Executive Order and the regulations in 41 CFR Part 60-4.
Compliance with the goals will be measured against the total work hours
performed.
3. The Contractor shall provide written notification to the Director of the
Office of Federal Contract Compliance Programs within 10 working days of
award of any construction subcontract in excess of $10,000 at any tier
for constrUction work under the contract resulting from this solicitation.
The notification shall list the name, address and telephone number of the
subcontractor; employer identification number; estimated dollar amount of
the subcontract; estimated starting and completion dates of the subcontract;
and the geographical area in which the contract is to be performed.
4. As used in this Notice, and in the contract resulting from this solicitation,
the "covered area" is Pinellas County, Florida.
60-4.3 (a) EQUAL OPPORTUNITY CLAUSE
During the performance of this contract, the contractor agrees as follows:
1. The contractor will not discriminate against any employee or applicant
for employment because of race, color, religion, sex, or national origin.
The contractor will take affirmat~ve action to ensure that applicants are
employed. and that employees are treated during employment wi~~out regard
to their race, color, religion, sex, or national origin. Such action shall
include, but not be limited to the following: Employment, upgrading,
demotion, or transfer; recruitment or recruitment advertising; layoff or
termination, rates of payor other forms of compensation; and selection
for training, including apprenticeship. The contractor agrees to post
in conspicuous places, available to employees and applicants for employ-
ment, notices to be provided setting forth the provisions of this non-
discrimination clause.
2. The contractor will, in all solicitations or advertisenents for employees
placed by or on behalf of the contractor, state that all qualified
applicants will receive consideration for employment without regard to
race, color, religion, sex, or national origin.
3. The contractor will send to each labor union or representative of workers
with which he has a collective bargaining agreement or other contract or
cnderstanding, a notice to be provided advising the said labor union or
workers' representatives of the contractor's commitments under this
section, and shall post copies of the notice in conspicuous places avail-
able to employees and applicants for employment.
F-2
4.
I
The contractor will comply
of September 24, 1965, and
of the Secretary of Labor.
,
with all prov~s~ons of Executive Order 11246
of th~ rules, regulations, and relevant orders
5. The contractor will furnish all information and reports required by
Executive Order 11246 of September 24, 1965, and by rules, regulations,
and orders of the Secretary of Labor, or pursuant thereto, and will permit
access to his books, records, and accounts by the administering agency
and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations, and orders.
6. In the event of the contractor1s non-compliance with the nondiscrimination
clauses of this contract or with any of the said rules, regulations, or
orders, this contract may be canceled, terminated, or suspended in whole
or in part and the contractor may be declared ineligible for further
Government contracts or federally assisted construction contracts in
accordance with procedures authorized in Executive Order 11246 of
September 24, 1965, or by rule, regulation, or order of the Secretary
of Labor, or as otherwise provided by law.
7. The contractor will include the portion of the sentence immediately
preceding paragraph (1) and the provisions of paragraphs (1) through (7)
in every subcontract or purchase order unless exempted by rules, regula-
tions, or orders of the Secretary of Labor issued pursuant to section
204 of Executive Order 11246 of September 24, 1965, so that such provisions
will be binding upon each subcontractor or vendor. The contractor will
take such action with respect to any subcontract or purchase order as
the administering agency may direct as a means of enforcing such provisions,
including sanctions for non-compliance: Provided, however, That in the
even~ a contractor becomes involved in, or is threatened with, litigation
wi th a subcontractor or vendor as a resul t of such direction by the
administering agency, the contractor may request the United States to enter
into such litigation to protect the interests of the United States.
STANDARD FEDERAL EQUAL EMPLOYMENT OPPORTUNITY CONSTRUCTION CONTRACT
SPECIFICATIONS (EXECUTIVE ORDER 11246)
L As used in these specifications:
a. "Covered area" means the geographical area described in the solicita-
tion from which this contract resulted.
b. "Director" means Director, Office of Federal Contract Compliance
Programs, United States Department of Labor, or any person to whom
the Director delegates authority.
c. "Employer identification number" means the Federal Social Security
number used on the Employer's Quarterly Federal Tax Return, U. S.
Treasury Department Form 941.
d. "Minority" includes:
F-3
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(1) Black (all persons having origins in any of the Black
African racial groups not of Hispanic origin);
(2) Hispanic (all persons of Mexican, Puerto Rican, Cuban,
Central or South American or other Spanish Culture or
origin, regarcless of race),
(3) Asian and Pacific Islander (~ll persons having origins
in any of the original peoples of the Far East, Southeast
Asia, the Indian Subcontinent, or the Pacific Islands); and
(4) American Indian or Alaskan Native (all persons having
origins in any of the original peoples of North America and
maintaining identifiable tribal affiliations through member-
ship and participation or community identification).
2. Whenever the Contractor, or any Subcontractor at any tier, subcontracts
a portion of the work involving any construction trade, it shall
physically include in each subcontract in excess of $10,000 the provi-
sions of these specifications and the Notice which contains the ~p-
plicable goals for minority and female participation and which is set
forth in the solicitations from which this contract resulted.
3. If the Contractor is participating (pursuant to 41 CFR 60-4.5) in a
Hometown Plan approved by ~~e O. S. Department of Labor in the covered
area either individually or through an association, its affirmative action
obligations on all work in the Plan area (including goals and timetables)
shall be in accordance with that Plan for those trades which have unions
participating in the Plan. Contractors must be able to demonstrate their
participation in and compliance wi~~ the provisions of any such Hometown
Plan. Each Contractor or Subcontractor participating in an approved Plan
is individually required to comply with its obliga tions under "the EEO
clause, and to make a good faith effort to achieve each goal under the
Plan in each trade in which it has employees. The overall good faith
performance by o~~er Contractors or Subcontractors ~oward a goal in an
approved Plan does not excuse any covered Contractor's or Subcontractor's
failure to take good faith efforts to achieve the Plan goals and time-
table.
4. The Contractor shall implement the specific affirmative action standards
provided in paragraphs 7a through p of these specifications. The goals
set forth in the solicitation from which this contract resulted are
expressed as percentages of the total hours of employment and training
of minority and female utilization the Contractor should reasonably be
able to achieve in each construction trade in'~ichit has employees in
the covered area. The Contractor is expected to make substantially
unifonn progress toward its goals in each craft during the period
specified.
5. Neither the proV1s10ns of any collective bargaining agreement, nor the
failure by a union with whom the COntractor has a collective bargaining
agreement, to refer either minorities or women shall excuse the Contrac-
tor's obligations under these specifications, Executive Order 11246, or
the regulations promulgated pursuant thereto.
F-4
6. In order for the nonworking training hours 0.1. apprent~ces a.na tra~nee~
to be counted in meeting the goals, such apprenti~les and trainees must
be employed by tie Contractor during the training period, and the
Contractor must have made a commitment to employ the apprentices and
trainees at the completion of their training, subject to the availabil-
ity of employment opportunities. - Trainees must be trained pursuant to
training programs approved by the U. S. Department of Labor.
7. The Contractor shall take specific affirmative actions to ensure equal
employment opportunity. The evaluation of the Contractor's compliance
with these specifications shall be based upon its effort to achieve
maximum results from its actions. The Contractor shall document these
efforts fully, and shall implement affirmative action steps at least as
extensive as the following:
a. Ensure and maintain a working environment free of harrassment,
intimidation, and coercion at all sites, and in all facilities at
which the Contractorls employees are assigned to work. The
Contractor, where possible, will assign two or more women to each
construction project. The Contractor shall specifically ensure that
all foremen, superintendents, and other on-site supervisory personnel
are aware of and carry out the Contractor's obligation to maintain
such a working environment, with specific attention to minority or
female individuals working at such sites or in such facilities.
b. Establish and maintain a current list of minority and female
recruitment sources, provide written notification to minority and
female recruitment sources and to community organizations when the
Contractor or its unions have employment opportunities available,
and maintain a record of the organizations' response~.
c. ~~intain a current file of the names, addresses and telephone
numbers of each minority and female off-the-street applicant and
minority or female referral from a union, a recruitment source or
community organization and of what .action was taken with respect
to each such individual. If such individual was sent to ~~e union
hiring hall for referral and was not referred back to ~~e Contractor
by the union or, if referred, not employed by the Contractor, this
shall be documented in the file with the reason therefor, along with
whatever additional actions the Contractor may have taken.
d. Provide immediate written notification to the Director when the
union or unions with which the Contractor has a collective
bargaining agreement has not referred to the Contractor a minority
person or woman sent by the Contractor, or when the Contractor has
other information that the union referral process has impeded the
Contractor's efforts to meet its obligations.
e. Develop on-the-job training opportunities and/or participate in
training programs for the area which expressly include minorities
and women, including upgrading programs and apprenticeship and
trainee programs relevant to the Con tractor's employment needs,
especially those programs funded or approved by the Department of
Labor. The Contractor shall provide notice of these programs to
the sources compiled under 7b above.
f. Disseminate the Contractor's EEO policy by providing notice of the
policy to unions and training programs and requesting ~~eir coopera-
tion in assisting the Contractor in meeting its EEO obligations ~ by
including it in any policy manual and collective bargaining agreement; by
F-S
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publicizing it in the company newspaper, annual report, etc.; by
specific review of the policy with all management personnel and
with all minority and female employees at least once a year; and
by posting the company EEO policy on bulletin boards accessible
to all employees at each location where construction work is
performed.
g. Review, at least annually, the company1s EEO policy and affirmative
action obligations under these specifications with all employees
having any responsibility for hiring, assignment. layoff, termina-
tion or other employment decisions including specific review of
these items with onsite supervisory personnel such as Superintendents,
General Foremen, etc., prior to the initiation of construction work
at any job site. A written record shall be made and maintained
identifying the time and place of these meetings, persons attending,
subject matter discussed, and disposition of the subject matter.
h. Disseminate the Contractor's EEO policy externally by including
it in any advertising in the news media, specifically including
minority and female news media, and providing written notification
to and discussing the Contractor's EEO policy with other Contrac-
tors and Subcontractors with whom the Contractor does or antici-
pates doing business.
1. Direct its recruitment efforts, both oral and written, to minority,
female and community organizations, to schools with minority and
female students and to minority and female recruitment and training
organizations serving the Contractor's recruitment area and employ-
ment needs~ Not later than one month prior to the date for the
acceptance of applications for apprenticeship or other training
by any recruitment source, the Contractor shall send written
notification to organizations such as the above describing the
openings, screening procedures, and tests to be used in the selection
process.
j. Encourage present minority and female employees to recruit other
minority persons and women and, where reasonable, provide'after
school, summer and vacation employment to minority and female youth
both on the site and in other areas of a Contractor's workforce.
k. Validate all tests and other selection requirements where there
is an obligation to do so under 41 CFR Part 60-3.
1. Conduct, at least annually, an inventory and evaluation at least of
of all minority and female personnel for promotional opportunities
and encourage these employees to seek or to prepare for, through
appropriate training, etc., such opportunities
m. Ensure that seniority practices, job classifications, work assign-
ments and other personnel practices, do not have a discriminatory
effect by continually monitoring all personnel and employment
related activities to ensure that the EEO policy and the Contractor's
P-6
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obligations under these specifications are being carried out.
n. Ensure that all facilities and company activities are non-
segrated except that separate or single-user toilet and
necessary changing facilities shall be prbvided to assure
privacy between the sexes.
o. Document and maintain a record of all solicitations of offers
for subcontracts from minority and female construction
contractors and suppliers, including circulation of solicitations
to minority and female contractor associations and other business
associations.
p. Conduct a review, at least annually, of all supervisors' adherence
to and performance under the Contractor1s EEO policies and
affirmative action obligations.
B. Contractors are encouraged to participate in voluntary associations
which assist in fulfilling one or more of their affirmative action
obligations (7a through pl. The efforts of a contractor association,
joint contractor-union, contractor-community. or other similar group
of which the contractor is a member and participant. may be asserted
as fulfilling anyone or more of its obligations under 7a through p
of these Specifications provided that the contractor actively partic-
ipates in the group, makes every effort to assure that the group has
a positive impact on the employment of minorities and women in the
industry, ensures that the concrete benefits of the program are
reflected in the Contractor's minority and female workforce partic-
ipation, makes a good faith effort to meet its individual goals and
timetables, and can provide access to documentation which demonstrates
the effectiveness of actions taken on behalf of the Contractor. The
obligation to comply, however, is the Contractor's and failure of such
a group to fulfill an obligation shall not be a defense for the
Contractor's noncompliance.
9. A single goal for minorities and a separate single goal for women have
been established. The Contractor, however, is required to provide
equal emp:!..oyment opportunity and to take affirmative action for all
minority groups, both male and female, and all women, both minority
and non-minority. Consequently, the Contractor may be in violation
of the Executive Order if a particular group is employed in a substan-
tially disparate manner (for example, even though the Contractor has
achieved its goals for women generally, the Contractor may be in
violation of the Executive Order if a specific minority group of women
is underutilized).
10_ The Contractor shall not use the goals and timetables or affirmative
action standards to discriminate against any person because of race,
color, religion, sex, or national origin.
11. The Contractor shall not enter into any Subcontract with any person
or firm debarred from Government contracts pursuant to Executive
Order 11246.
F-7
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12. The Contractor shall carry out such sanctions and penalties for
violation of these specifications and of the Equal Opportunity Clause,
including suspension, termination and cancellation of existing sub-
contracts as may be imPosed or ordered pursuant to Executive Order
11246, as amended, and its implementing regulations, by the Office
of Federal Contract Compliance Programs. Any Contractor who fails
to carry out such sanctions and penalties shall be in violation of
these specifications and Executive Order 11246, as amended.
13. The Contractor, in fulfilling its obligations under these specifications,
shall implement specific affirmative action steps, at least as exten-
sive as those standards prescribed in paragraph 7 of these specifica-
tions, so as to achieve maximum results from i~ efforts to ensure
equal employment opportunity. If the Contractor fails to comply with
the requirements of the Executive Order, the implementing regulations,
or these specifications, the Director shall proceed in accordance with
41 CFR 60-4.8.
14. The Contractor shall designate a responsible official to monitor all
employment related activity to ensure that the company EEO policy is
being carried out, to submit reports relating to the provisions hereof
as may be required by the Government and to keep records. Records
shall at least include for each employee the name, address, telephone
numbers, construction trade, union affiliation if any, employee
identification number when assigned, social security number, race,
sex, status (e.g., mechanic, apprentice, trainee, helper, or laborer),
dates of changes in status, hours worked per week in the indicated
trade, rate of pay, and locations at which the work was performed.
Records shall be maintained in an easily understandable and retrievable
form; however, to the degree that existing records satisfy this
requirement. contractors shall not be required to maintain separate
records.
15. Nothing herein provided shall be construed as a limitation upon the
application of other laws which establish di!ferent standards of
compliance or upon the application of requirements for the hiring of
local or other area residents (e.g., those under ~~e Public Works
Employment Act of 1977 and the Community Development Block Grant
Program) .
F-8
agreement during the period of the
agreement and based on either:
(i) Prior level of rehabilitation,aclivity:
or
(ii) Rehabilitation staffing and
management plans of the locality for the
period of the agreement.
Subpart K-other Program
Requirements
~ 570.600 Genera'
(a) Section l04(b) (J the Act provides
that any grant under section 106 of the
Act shall be rr." - nly if the grantee
certifies to the sutisfaction of the
Secretary, among other things, that the
grllnt "will be conducted and
administered in conformity with Pub. 1..
88-352 and Pub. L, 90-284," and, further,
that the grantee "will comply with the
other provisions of this title and with
other applicable laws," Section l04(d)(l)
of the Act requires that the Secretary
determine with respect to grants made
pursuant to section 100(b) (Entitlement
Grants] and 100(d)(2J(B) (HUD-
Administered Small Cities Grants), at
least on an annual basis, among other
things. "whether the grantee has carried
out [its] certifications in compliance
with the requirements and the primary
objectives of this title and with other
applicable laws · · · ," Certain other
statutes are expressly made applicable
to activities assisted under the Act by
the Act itself, while other laws not
referred to in the Act may be applicable
to such activities by their own terms.
Certain statutes or Executive Orders
which may be applicable to activities
assisted under the Act by their own
terms are administered or enforced by
governmental departmen18 or agencies
other than the Secretary or the
Department. This Subpart K enumerates
laws which the Secretary will treat as
applicable to grants made under section
106 of the Act, other than grants to
I
States made pursuant to section 100(d)
of the Act. for purposes of the
determinations described above to be
made by the Secretary under section
104(d)(1) of the Act. including statutes
expressly made applicable by the Act
and certain other statutes and Executive
Orders for which the Secretary has
enforcement responsibility. The absence
of mention herein of any other statute.
for which the Secretary does not have
direct enforcement responsibility is not
intended to be taken as an indication
that, in the Secretary's opinion. such
statute or Executive Order Is not
applicable to activities assisted under
the Act. For laws which the Secretary
will treat as applicable to grants made
to States under section l00(d) of the Act
for purposes of the determination
required to be made by the Secretary
pursuant to section 104(d)(2) of the Act,
see I 570.496.
(b) This Subpart also sets forth certain
additional program requirements which
the Secretary has determined to be
applicable to grants provided under the
Act as a matter of administrative
discretion.
(c) In addition to grants made
pursuant to section l00(b) and
106(d)(2)(B) of tbe Act (Subparts D and F
of this Part, respectiyely). the
requirements of this Subpart K are
applicable to grants made pursuant to
sections 107 and 119 of the Act
(Subparts E and G, respectively).
~ 570.601 Pub. L 88-352 end Pub. L 90-
284; Executive Order 11063.
Section 104(b) of the Act provides that
any grant under section 106 of the Act
shall be made only if the grantee
certifies to the satisfaction of the
Secretary that the grant "will be
conducted and administered in
conformity with Pub. 1.. 8&-352 and Pub.
L. 90-284." Similarly, section 107
provides that no grant may be made
G-l
,
under that section (Secretary's
Discretionary Fund) or section 119
(UDAG) without satisfactory assurances
to' the same effect.
(a) "Pub, 1.. 88-352" refert \0 Title VI
of the Civil Rights Act of 1964 (42 U.S.C.
2OCJOc:i et seq.). which provides that no
person tnthe United States shall on the
ground of race, color, or national origin.
be excluded from participation in. be
denied the benefits of. or be subjected to
discrimination under any program or,
activity receiving Federal financial
assistance. Section 602 of the Civil
Rights Act of 1964 directs eacb Federal
department and agency empowered to
extend Federal financial assistance to
any program or activity by way of grant
to effectuate the foregoing prohibition
by issuing roles, regulations, or orders of
general applicability which shall be
consistent with achievement of the
statute authoriEing the financial
assistance. HUD regulations
implementing the requirements of Title
Vlwitb respect to HUD programs are
contained in 24 CFR Part 1.
(b) "Pub. 1.. 90-284" refers to Title VIII
of the, Civil Rights Act of 1968 (42 U.S.C,
3601 et seq.). popularly known as the
Fair Housing Act. which provides that it
is the policy of the United Sta les to
provide, within constitutional .
limitations. for fair housing throughout
the United States and prohibits any
perton from discriminating in the sale or
rental of housing, the financing of
housing, or the provision of brokerage
services, Including in any way making
unavailable or denying a dwelling to
any'perton. because of race, color.
religion, sex, or national origin. Title
VIII further requires the Secretary to
administer the programs and activities
relating to ho~sing and urban
development In a manner affirmatively
to further the purposes of Title VIII.
Pursuant to this statutory direction, the
Secretary requires that grantees
adminiBter all programs and activities
/J~f'f)J(>i,o( G
I
related to housing and community
development in a manner to
affirmatively further fair housing,
(c) Executive Order 11063. as
amended by Executive Order 12259.
directs the Department to take al1 action
necessary and appropriate to prevent
discrimination because of race, color.
religion (creed), sex. or national origin,
in the sale. leasing, renlal. or other
disposition of residential property and
related facilities (including land to be
developed for residential use). or in the
use or occupancy thereof. if such
property and related facilities are,
among other things. provided in whole
or in part with the aid of loans,
advances. grants, or contributions
agreed to be made by the Federal
Government. HUD regulations
implementing Executive Order 11063 are
contained in 24 CFR Part 107,
~ 570.602 Section 109 of the Act.
(a) Section 109 of the Act requires that
no person in the United States shall on
the ground of race, color, national origin
or sex, be excluded from participation
in, be denied the benefits of, or be
subjected to discrimination under, any
program or activity funded in whole or
in part with community development
funds made available pursuant to the
Act. For purposes of this section
"program or activity" is defined as any
function conducted by an identifiable
administrative unit of the recipient, or
by any unit of government. subrecipient.
or private conlraclor receiving
community development funds or loans
from the recipient. "Funded in whole or
in part with community development
funds" means that community
development funds in any amount in the
form of grants or proceeds from HUD
guaranteed loans have been transferred
by the recipient or a subrecipient to an
identifiable administrative unit and
disbursed in a program or activity,
(b) Specific discriminatory actions
prohibited and corrective actions.
(1) A recipient may not, under any
program or activity to which the
regulations ofthis Part may apply
directly or through contractual or other
arrangements, on the ground of race.
color, national origin. or sex:
(i) Deny any facilities. services,
financial aid or other benefits provided
under the program or activity.
(ii) Provide any facilities, services,
financial aid or other benefits which are
different. or are provided in a different
form from that provided to others under
the program or activity.
(iii) Subject to segregated or separate
treatment in any facility in, or in any
matter of process relat~d to receipt of
any service or benefit under the program
or activity.
(iv) Restrict in any way access to. or
in the enjoyment of any advantage or
privilege enjoyed by others in
connection with facilities, services.
financial aid or other benefits under the
program or activity.
(v) Treat an individual differently
from others in determining whether the
individual satisfies any admission,
enrollment. eligibility. membership, or
other requirement o,r condition which
the individual must meet in order to be
provided any facilities. services or other
benefit pro\'ided under the program or
activity.
(vi) beny an opportunity to participate
in a program or activity as an employee.
(2) A recipient may not utilize criteria
or methods of administration which
have the effect of subjecting individuals
to discrimination on the basis of race.
color. national origin, or sex, or have the
effect of defeating or substantially
impairing accomplishment of the
objectives of the program or activity
with respect to individuals of a
particular race. color. national origin, or
sex,
[3) A recipient. in determining the site
or location of housing or facilities
provided in whole or in part with funds
under this part. may not make selections
of such site or location which have the
effect of excluding individuals from.
denying them the benefits of. or
subjecting them to discrimination on the
G-2
I
ground of race, color, national origin, or
sex; or which have the purpose or effect
of defeating or substantially impairing
the accomplishment of the objectives of
the Act and of this seCtion.
(4)(i) In administering a program or
activity funded in whole or in part with
CDBG funds regarding which the
recipient has previously discriminated
against persons on the ground of race.
color, national origin or sex. the
recipient must take affirmative action to
overcome the effects of prior
discrimination.
(ii) Even in the absence of such prior
discrimination. a recipient in
administering a program or activity
funded in whole or in part with CDBG
funds should take affirmative action to
overcome the effects of conditions
which would otherwise result in limiting
participation by persons of a particular
race, color. national origin or sex.
Where previous discriminatory practice
or usage tends, on the ground of race.
color. national origin or sex. to exclude
individuals from participation in. to
deny them the benefits of. or to subject
them to discrimination under any
program or activity to which this part
applies. the recipient has an obligation
to take reasonable action to remove or
overcome the consequences of the prior
discriminatory practice or'usage. imd to
accomplish the purpose of the Act.
(iii) A recipient shall not be prohibited
by this part from taking any action
eligible under Subpart C to ameliorate
an imbalance in services or facilities
provided to any geographic area or
specific group of persons within its
jurisdiction. where the purpose of such
action in to overcome prior
discriminatory practice or usage.
(5) Notwithstanding anything to the
contrary in this section. nothing
contained herein shall be construed to
prohibit any recipient from maintaining
or constructing separate living facilities
or rest room facilities for the different
sexes. Furthermore. selectivity on the
basis of sex is not prohibited when
institutional or custodial serVices can
I
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I
Tuesday
July 8, 1980
Note: This reprint incorporates
corrections published at 46 FR 17185,
Tuesday, March 17, 1981,
Part III
Office of
Management and
Budget
Circular A-122, "Cost Principles for
Nonprofit Organizations"
/JP/,/.:tv D I X 1-1.
I
J
46022
Federal Register I Vol. 45. No, 132 I Tuesday. July 8. 1980 I Notices
OFFICE OF MANAGEMENT AND
BUDGET
Circular A-122, "Cost Principles for
Nonprofit Organizations"
(Note: This reprint incorporales corrections
puulished at 46 FR 17185, Tuesday, March 17,
19B1-1
AGENCY: Office of Management and
Budget.
ACTION: Final Policy,
SUMMARY: This notice advises of a new
OMB Circular dealing with principles for
determining costs of grants, contracts.
and other agreements with nonprofit
organizations.
The Circular is the product of an
interagency review conducted over a
two-year period, Its purpose is to
provide a set of cost principles to
replace existing principles issued by
individual agencies. These have often
contained varying and conf1icting
requirements. and created confusion
among agency administrators, auditors.
and nonprofit officials, The new Circular
will provide a uniform approach to the
problem of determining costs, and
promote efficiency and better
understanding between recipients and
the Federal Government.
EFFECTIVE DATE: The Circular becomes
effective on issuance,
FOR FURTHER INFORMATION CONTACT:
Palmer A. Marcantonio. Financial
Management Branch. Office of
Management and Budget. Washington,
D,C, 20503, (202) 395-4773,
SUPPLEMENTARY INFORMATION: Before
the Circular became final there was
extensive coordination with the affected
nonprofit organizations. professional
associations. Federal agencies and
others, All interested persons were
given an opportunity to comment on the
proposed Circular through informal
consultations and a notice in the Federal
Register. In response to our requests for
comment. we received about 100 letters
from Federal agencies. nonprofit
organizations. associations, and other
interested members of the public. These
comments were considered in the final
version of the Circular. There follows a
summary of the major comments and the
action taken on each.
In addition to the changes described,
other changes have been made to
improve the clarity and readability of
the Circular. To the extent possible. we
have tried to make the language of this
Circular consistent with that of cost
principles for educational institutions
(Circular A-21). and State and local
gllVI!rI1ments (Circular 74-4),
SIIIIIII/(I/)' of Siglllfica,nt Changes:
Sl~t fmth are changes that have been
made :n the final Circular as a result of
public comments, The more significant
changes to the basic Circular and
Attachment A include:
1, ParagrLlph 2, "Supersession" was
added to the bLlsic Circular to make it
clear that this Circular supersedes cost
principles issued by individual agencies.
2, Paragrtlph 4 of the basic Circular
has been amended to make it clear that
the absence of an advance agreement on
any element of cost will not in itself
affect the reasonableness of allocability
of that element. Also. this paragcaph
was amended to make it clear that
where an item of cost requiring prior
approval is specified in the budget.
approval of the budget constitutes
approval of the cost.
3, Paragraph 5 of the basic Circular
has been changed to remove any doubt
as 10 which nonprofit organiza tions
would not be covered by the Circular,
Now. Appendix C to the Circular lists all
exclusions,
4, Paragraph 8 was added to the basic
Circular to permit Federal agencies to
request exceptions from the
requirements of the Circular,
5, Paragraph E,2, was added to
Attachment A to cover the negotia tion
and approval of indirect cost rates, and
to provide for cognizance arrangements,
The more significant changes to
Attachment B to the Circular include:
1. Paragraph 6. Compensation for
Personal Services, was modified to:
a. Permit Federal agencies to accept a
substitute system for documenting
personnel costs through means other
than personnel activity reports.
b. Clarify provisions covering the
allowability of costs for unemployment
compensation or workers'
compensation. and costs of insurance
policies on the lives of trustees. officers.
or other employees.
c. Make unallowable any increased
costs of pension plans caused by
delayed funding,
d, Delete a paragraph dealing with
review and approval of compensation of
individual employees. ,
2, Paragraph 7. Contingencies, was
changed to make it clear that the term
"contingency reserves" excludes self-
insurance reserves or pension funds,
3. Paragraph 10 was modified to
provide that the value of donated
services used in the performance of a
direct cost activity shall be alloca ted a
share of indirect cost only when (a) the
aggregate value of the service is
material. (b) the services are supported
by a significant amount of the indirect
cost incurred by the organization. and
(c) the direct cost activity is not pursued
primarily for the benefit of the Federal
Government. Provisions wer.e also
added to this paragraph for the
cognizant agency and the recipient 10
negotiate when there is no basis for
determining the fair market value of the
services rendered. and to permit indirect
costs allocated to donated services to be
charged to an agreement or used to meet
cost sharing or matching requirements,
4. Paragraph 13. Equipment and Other
Capital Expenditures, was changed,
Capital equipment is now defined as
having an acquisition cost of $500 and a
useful life of more than two years.
5. Paragraph 24, kleetill,l)s,
Conferences, The prior ilppro\'al
requirement for charging nwetings and
conferences as a direct cost was
deleted. A senlence was added to make
it clear such costs were allowable
provided they meelthe criterion for thL:
allowability of cost shown in
Attachment A.
6. Paragraph 26, Ol;l)onization Costs.
was amended to provide that
organization costs may be allowablr:
when approved in writing by the
awarding agency,
7, Paragraph 28, Pos;e Chwges ill
Professional fournols, was revised to
provide that page charges may be
allowable, ,
8. Paragraph 36, Public Inf(Jr/llut iUII
Service Costs, was modified to milke
public information costs allowable as
direct costs with awarding agency
approvaL
9. Paragraph 42. Rental Custs, was
rewritten to:
a, Make it clear that renlal costs
under leases which crea te a ma terial
equity on the leased property an:
allowable only up to the amount thai the
organization would have been allowed
had it purchased the property: e,g"
depreciation or use allowances,
maintenance. taxes, insuranCl~, l:tc,
b. Clarify the criteria for material
equity leases,
10. Paragraph 50. Travel Costs, was
amended to delete the prior approval
requirement for domestic traveL In
addition to the above. a number of
editorial changes were made to the
original document.
Suggested Changes Not COllsidered
Necessary,
Comment. Several respondents
questioned the provision that. for "less
than arm's length" leases. rental costs
are allowable only up to the amount that
would be allowed had title to the
property been vested in the gran lee
organization. In their opinion this rule
will result in unnecessary cost to the
Federal Government. since it would
encourage an organization to lease
space on the commercial market at a
higher rate.
Federal R gisler I Vol. 45, No. 132 I Tuesday, July . 1980 I Notices
Response, The cost principles are
designed to cover most situations;
however. there arc lllways exceptions
that must be considered on a case-by-
case basis. The Circular contains a
provision for Federal agencies to request
exceptions,
Comment. Several respondents
questioned why interest is not an
allowable cosl. since it is an ordinary
and necessary cost of doing business.
Response, It has been a longstanding
policy not to recognize interest as a cost.
However, this policy has recently been
revised for State and local governments
in Circular 7~. with respect to the cost
of office spuce. The revision provides
that "rental" rates for publicly owned
buildings may be based on actual costs.
including depreciation, interest,
operation and maintenace costs, and
other allowable costs. This revision was
under consideration for some time, It
was studied extensively by OMB, the
General Accounting Office and others,
and considerable una lysis went into its
formula tion, Suggestions for extending it
to nonprofit organizations would have to
be exumined with equal care. This has
not yet been done;- and we were
reluctant to further delay issuance of
this Circular,
Comn/ent, Several respondents
questioned why public information costs
were not allowable as an indirect cost.
Response, Public information costs
are often direct services to an
organization's other programs. They are
allowable, however, as a direct charge
when they are within the scope of work
of a particular agreement.
COn/ment, One respondent suggested
that smaller grantees be excluded from
complying with the Circular.
Response, Similar rules for the 50
selected items of cost would be needed
regardless of the size of the grantee, To
the extent possible, the Circular
provides simplified methods for smaller
grantees,
Comment, One respondent said the
requirements of the Cost Accounting
,Standards Board should be applied to
cover contracts with nonprofit
organizations,
/1/!sponse. It is unlikely that the type
of grantees covered by this Circular
would have contracts large enough to be
covered by the CASB, In the event that
they do, however, the regulations of the
CASB would upply.
Comment, One respondent said the
alloca tion of indirect cost to donated
services would pose a tremendous
difficulty to the organization. The
organization relies on a corps of
approximately !I,OOO commiltee members
to carry out obligations in response to
C()\'(~rnment requests, There is no
employer relationship in the
arrangements for this assistance, nor are
there committee members normally
reimbursed for such services, Further. it
was pointed out the committee members
spend many thousands of hours outside
the organization's premises conducting
research.
Response. It would appear that this
type of committee arr.angement would
not be considered in the determination
of the organization's indirect cost rate
provided that Federal agreements do not
bear an unreasonable share of indirect
cost. However. the cognizant agency
will be responsible for evaluating the
allocation of indirect cost where there
are commiltee,type arrangements on a
case-by-case basis,
Comment. One respondent suggested
that wherever possible the language in
the Federal Procurement Regulations be
used for nonprofit organizations.
Response, The language in the Federal
Procurement Regulations was
designated primarily for commercial
firms, and is not necessarily well suited
to nonprofit organizations, At the
suggestion of the General Accounting
Office. the nonprofit cost principles
were written to conform as closely as
possible to those of educational
institutions (Circular A-21). and State
and local governments (Circular 7~).
John J. Lordan,
Chief. Financial Management Branch.
[Circular No. A-122]
June 27, 1980
To The Heads of Executive
Departments and Establishments
Subject: Cost principles for nonprofit
organiza tions.
1. Purpose. This Circular establishes
principles for determining costs of
grants. contracts and other agreements
with nonprofit organizations, It does not
apply to colleges and universities which
are covered by Circular A-21; State,
local. and federally recognized Indian
tribal governments which are covered
by Circular 7~; or hospitals. The
principles are designed to provide that
the Federal Government bear its fair
share of costs except where restricted or
prohibited by law. The principles do not
attempt to prescribe the extent of cost
sharing or matching on grants. contracts.
or other agreements. However, such cost
sharing or matching shall not be
accomplished through arbitrary
limitations on individual cost elements
by Federal agencies. Provision for profit
or other increment above cosl is outside
the scope of this Circular.
2. Supersession. This Circular
supersedes cost principles issued by
46023
individual agencies for nonprofit
organization.
3, Applicability. a. These principles
shall be used uy all Federal agencies in
determining the costs of work performed
by nonprofit organizations under grants.
cooperative agreements, cost
reimbursement contracts, and other
contracts in which costs are used in
pricing. administration. or selllement.
All of these instruments are hereafter
referred to as awards. The principles do
not apply to awards under which an
organization is not required to accuunt
to the Government for actual costs
incurred.
b. All cost reimbursement subawards
(subgrants, subcontracts, etc,) are
subject to those FederLll cost principles
applicLlble to the purticulur organization
concerned. Thus, if a subaward is to a
nonprofit organization, this Circular
shall apply; if a subaward is to a
commercial organization, the cost
principles applicable to commerciul
concerns shall apply; if a subaward is to
a college or university, Circular A-21
shall apply; if a subaward is to a Srate,
local. or federally recognized Indian
tribal government, Circular 74-4 shall
apply,
4. Definitions, a. "Nonprofit
organization" means any corpora lion,
trust, association, cooperative, or other
organization which (1) is operated
primarily for scientific. educational.
service, charitable, or similar purposes
in the public interest; (2) is not
organized primarily for profit; and (3)
uses its net proceeds to maintain,
improve, and/or expand its opewtions,
For this purpose, the term "nonprofit
organization" excludes (i) colleges and
universities; (ii) hospitals; (Hi) Staie,
local, and federally recognized Indian
tribal governments; and (iv) those
nonprofit organizations which are
excluded from coverage of this Circular
in accordance with paragraph 5 below.
b. "Prior approval" means securing
the awarding agency's permission in
advance to incur cost for those items
that are designated as requiring prior
approval by the Circular. Generally this
permission will be in writing. Where an
item of cost requiring prior approval is
specified in the budget of an award,
approval of the budget constitutes
,approval of that cost.
5. Exclusion of some nonprofit
organizations. Some nonprofit
organizations. because of their size Lind
nature of operations, can be considered
to be similar to commercial concerns fur
purpose of applicability of cost
principles, Such nonprofit organiza tions
shall operate under Federal cost
principles applicable to commercial
concerns. A listing of these
46024
Federal Register /~ol. 45, No. 132 / Tuesday, July 8, 1980 J Notices
organizations is contained in
Attachment C. Other organizations may
be added from time to time.
6, Responsibilities. Agencies
responsible for administering programs
that involve awards to nonprofit
organizations shall implement the
provisions of this Circular. Upon
request, implementing instruction shall
be furnished to the Office of
Management and Budget. Agencies shall
designate a liaison official to serve as
the agency representative on matters
relating to the implementation of this
Circular. The name and title of such
representative shall be furnished to the
Office of Management and Budget
within 30 days of the date of this
Circular.
7. Attachments, The principles and
rela ted policy guides are set forth in the
following Attachments:
Attachment A-General Principles
Allachment B-Selected Items of Cost
Attachment C-Nonprofit
Organizations Not Subject to This
Circular
8. Requests for exceptions. The Office
of Management and Budget may grant
exceptions to the requirements of this
Circular when permissible under
existing law. However, in the interest of
achieving maximum uniformity,
exceptions will be permitted only in
highly unusual circumstances.
9. Effective Date, The provisions of
this Circular are effective immediately.
Implementation shall be phased in by
incorporating the provisions into new
awards made after the start of the
organization's next fiscal year. For
existing awards the new principles may
be applied if an organization and the
cognizant Federal agency agree. Earlier
implementation, or a delay in
implementation of individual provisions
is also permilled by mutual agreement
between an organization and the
cognizant Federal agency.
10. Inquiries. Further information
concerning this Circular may be
obtained by contacting the Financial
Management Branch, Budget Review
Division, Office of Management and
Budget, Washington, D.C. 20503,
telephone (202) 395-4773.
lames T. Mclnlyre, Jroo
Dirt'ctor,
ICircular No. A-1221
Allachment A
General Principles
Tabll' or Con/I'nts
A, Basic Considerations
1, Composition of tolal costs
2, Factors affecting iJllowabilily of costs
3, Rl~asonable cosls
4, Allocable costs
5, Applicable credits
6, Advance understandings
B, Direct Costs
C. Indirect Costs
D, Allocation of Indirect Costs and
Determination of Indirect Cost Rates
1. General
2, Simplified allocation method
3, Multiple allocation base method
4, Direct allocation method
5, Special indirect cost rates
E. Negotiation and Approval of Indirect Cost
Rates
1, Definitions
2, Negotiations and approval of rates
[Circular No, A-122]
Allachment A
General Principles
A. Basic Considerations.
1. Composition of total costs, The total cost
of an award is the sum of the allowable
direct and allocable indirect costs less any
applicable credits,
2, Factors affecting allowability of costs,
To be allowable under an award, costs must
meet the following general criteria:
a, Be reasonable for the performance of the
award and be allocable thereto under these
principles,
b, Conform to any limitations or exclusions
set forth in these principles or in the a ward
as to types or amount of cost items,
c. Be consistent with policies and
procedures that apply uniformly to both
federally financed and other activities of the
organization,
d, Be accorded consistent treatment.
e, Be determined in accordance with
generally accepted accounting principles,
r. Not be included as a cost or used to meet
cost sharing or matching requirements of any
other federally financed program in either the
current or a prior period,
g. Be adequately documented,
3, Reasonable costs, A cost is reasonable
if. in its nature or amount, it does not exceed
that which would be incurred by a prudent
person under the circulllstances prevailing at
the time the decision was made to incur the
costs, The question of the reasonableness of
specific costs must be scrutinized with
particular care in connection with
organizations or separate divisions thereof
which receive the preponderance of their
support from awards made by Federal
agencies, In determining the reasonableness
of a given cost, consideration shall be given
to:
a. Whether the cost is of a type generally
recognized as ordinary and necessary for the
opera tion of the organiza tion or the
performance of the award.
b. The restraints or requirements imposed
by such factors as generally accepted sound
business practices. arms length bargaining.
Federal and State laws and regulations, and
terms and conditions of the .award,
c. Whether the individuals concerned acted
with prudence in the circumstances,
considering their responsibilities to the
organization. its members. employees. and
clients. the public at large. and the
GovernmenL
d, Significant deviations from the
established practices of the organization
which may unjustifiably increase the award
costs,
4. Allocable costs,
a, A cost is allocable to a particular cost
objective. such as a grant. project. service, or
olher activity. in accordance with the relative
benefits received, A cost is allocable to a
Government award if it is treated
consistently with other cosls incurred for the
same purpose in like circumstances and if it:
(1) Is incurred specifically for the award.
(2) Benefits both the award and other work
and can be distributed in reasonable
proportion to the benefits received, or
(3) Is necessary to the overall operation of
the organization. although a direct
relationship to any particular cost objective
cannot be shown,
b, Any cost allocable to a particular award
or other cost objective under these principles
may not be shifted to other Federal awards to
overcome funding deficiencies, or to avoid
restrictions imposed by la w or by the terms
of the award,
5, Applicable credits,
a, The term applicable credits refers,to
those receipts. or reduction of expenditures
which opera te 10 offset or reduce expense
items that are allocable to awards as direct
or indirect costs, Typical examples of such
transactions are: purchase discounts. rebates
or allowances. recoveries or indemnities on
losses, insurance refunds, and adjustments of
overpayments or erroneous charges, To the
extent that such credits accruing or received
by the organization relate to allowable cost
they shall be credited to the Government
either as a cost reduction or cash refund as
appropriate,
b. In some instances, the amounts received
from the Federal Government to finance
organizational activities or service operations
should be treated as applicable credits,
Specifically, the concept of netting such
credit items against related expenditures
should be applied by the organiza lion in
determining the rates or amounts to be
charged to Federal awards for services
rendered whenever the facilities or olher
resources used in providing such services
have been financed directly, in whole or in
part, by Federal funds,
(c) For rules covering program income
(Le" gross income earned from federally
supported activities) see Attachment 0 of
OMB Circular A-lID,
6. Advance understandings, Under any
given award the reasonableness and
allocability of certain items of costs may be
difficult to determine, This is piJrticularly true
in connection with organizations that receive
a preponderance of their support from
Federal agencies. In order to avoid
subsequent disallowance or dispute based on
unreasonableness or nonallocability, it is
often desirable to seek iJ written agreement
with the cognizant or awarding agency in
advance of the incurrence of sp(~cial or
unusual costs, The absence of an adviJnce
agreement on any element of cost will noL in
itself. affect the reasonableness or
allocability of.that elenwlll.
Federal 19ister / Vol. 45, No; 132 / Tuesday, JulJ8, 1980 / Notices
46025
8, Direct Costs
1. Direct costs are those that can be
identified specifically with a particular final
cost objective: Le,. a particular award,
project. service. or other direct activity of an
organization, However. a cost may nol be
assigned to an award as a direct cost if any
othercosl incurred for the same purpose. in
like circumslances, has been allocated to an
award as an indirect cost. Cosls identified
specifically with awards are direct costs of
the awards and are to be assigned directly
thereto, Costs identified specifically with
other final cosl objectives of the organization
arc direct costs of those cost objectives and
are not to be assigned to other awards
directly or indirectly,
2. Any direct cost of a minor amounl may
be trealed as an indirect cost for reasons of
practicality where the accounting treatment
for such cosl is consistently applied 10 all
final cost objectives,
3, The cost of certain activities are not
allowable as charges to Federal awards (see.
for example, fund raising costs in paragraph
19 of Attachment B), However, even though
these costs are unallowable for purposes of
computing charges to Federal awards, they
nonetheless must be treated as direct cost for
purposes of determining indirect cost rates
and be allocated their share of the
organization's indirect costs if they represent
activities which (l) include the salaries of
personnel. [2) occupy space. and (3) benefit
from the organization's indirect costs,
4, The costs of activities performed
primarily as a service to members. clients. or
the general poblic when significant and
necessary to the organization's mission must
be treated as direct costs whether or not
allowable and be alloca1ed an equitable
share of indirect costs, Some examples of
these Iypes of activities include:
a, Maintenance of membership rolls.
subscriptions. publications. and related
functions,
b, Providing services and information to
members, legislative or administrative
bodies. or the public,
c, Promotion, lobbying. and other forms of
public relations,
d. Meetings and conferences except those
held to conduct the general administration of
the organization,
3, Maintenance, protection. and investment
of special funds not used in operation of the
organiziltion,
r. Administration of group benefits on
behalf of members or clients including life
and hospilal insurance. annuity or retirement
plans, financial aid, etc,
C. III direct Cost.
1, Indirect costs are those that have been
incurred for common or joint objectives and
cannot be readily identified with a particular
final cost objective, Direct cost of minor
amounts may be treated as indirect costs
under the conditions described in paragraph
B,2, ahove, After direcl cosls have been
delermined and assigned directly to awards
or other wurk as appropriale. indirect costs
are Ihose remaining to be allocated to
benefiting cosl objeclives, A cost may not be
allocated to an award as an indirect cost if
any olher cost incurred for the same purpose,
in like circumstances, has been assigned to
an award as a direct cost.
2. Because of the diverse characteristics
and accounting practices of nonprofit
organizations, it is not possible 10 specify the
types of costs which may be classified as
indirect cost in all situations. However,
typical examples of indirect cost for many
nonprofit organizations may include
depreciation or use allowances on buildings
and equipment, the costs of operating and
maintaining facilities, and general
administration and general expenses, such as
the salaries and expenses of executive
officers, personnel administration, and
accounting,
D, Allocation of Indirect Costs and
Determination of Indirect Cost Rates,
1, General,
a.,Where a nonprofit organization has only
one major Function, or where all its major
functions benefit from its indirect costs to
approximately the same degree, the
allocation of indirect costs and the
computation of an indirect cost rate may be
accomplished through simplified allocation
procedures as described in paragraph 2
below,
b. Where an organization has several major
functio:1s which benefit from its indirect costs
in varying dpgrees, allocation of indirect
costs may require the accumulation of such
costs into separate cost groupings which then
are allocated individually to benefiting
functions by means of a base which best
measures the relative degree of benefit. The
indirect costs allocated to each function are
then distributed to individual awards and
other activities included in that function by
means of an indirect cost raters).
c, The determination of what constitutes an
organization's major Functions will depend on
its purpose in being; the types of services it
renders to the public, its clients, and its
members; and the amount of effort it devotes
to such activities as fund raising, public
information and membership activities.
d. Specific methods for allocating indirect
costs and computing indirect cost rates along
with the conditions under which each method
should be used are described in paragraphs 2
through 5 below.
e, The base period for the allocation of
indirect costs is the period in which such
costs are incurred and accumulated for
allocation to work performed in that period,
The base period normally should coincide
with the organization's fiscal year, but in any
event, shall be so selected as to avoid
inequities in the allocation of the costs.
2, Simplified allocation method.
a. Where an organization's major functions
benefit from its indirect costs to
approximately the same degree, the
allocation of indirect costs may be
accomplished by (i) separating the
organization's total costs for the base period
as either direct or indirect, and (ii) dividing
the total allowable indirect costs (net of
applicable credits) by an equitable
distribution base, The result of this process is
an indirect cost rate which is used to
distribute indirect costs to individual awards,
The rate should be expressed as the
percentage which the total amount of
allowable indirect costs bears to the base
selected. This method should also be used
where an organization has only one major
funelion encompassing a number of
individual projects or activities, and may be
used where the level of Federal awards to an
organization is relatively small.
b. Both the direct costs and the indirect
costs shall exclude capital expendit<lres and
unallowable costs. However, unallowable
costs which represent activities must be
included in the direct costs under the
conditions described in paragraph B.3, above,
c, The distribution base may be total direct
costs (excluding capital expenditures and
other distorting items, such as major
subcontracts or subgrants), direct salaries
and wages, or other base which results in an
equitable distribution, The distribution base
shall generally exclude participant support
costs as defined in paragraph 29 of
Attachment B,
d, Except where a special raters) is
required in accordance with paragraph D,S
below, the indirect cost rate developed under
the above principles is applicable to all
awards at the organization, If a special
rate(s] is required, appropriale modifications
shall be made in order to develop the special
raters),
3, Multiple allocation base nwlhod.
a, Where an organization's indirect costs
benefit its major functions in varying degrees,
such costs shall be accumulated into separate
cost groupings, Each grouping shall then be
allocated individually to benefiting functions
by means of a base which best measures the
rela tive benefi ts,
b, The groupings shall be established so as
to permit the allocation of each grouping on
the basis of benefits provided to the major
functions. Each grouping should constitute a
pool of expenses that are of like character in
terms of the functions they benefit and in
terms of the allocation base which best
measures the relative benefits provided to
each function, The number of separate
groupings should be held within practical
limits, taking into consideration the
materiality of the amounts involved and the
degree of precision desired,
c, Actual conditions must be taken into
account in selecting the base to be used in
allocating the expenses in each grouping to
benefiting functions, When an allocation can
be made by assignment of a cost grouping
directly to the function beneFited, the
allocation shall be made in that manner.
When the expenses in a grouping are more
general in nature, the allocation should be
made through the use of a selected base
which produces results that are equitable to
both the Government and the organization, In
general, any cost element or cost related
factor associated with the organization's
work is potentially adaptable for use as an
allocation base provided (i) it can readily be
expressed in terms of dollars or other
quantitative measures (total direct costs,
direct salaries and wages, staff hours applied,
square feet used. hours of usage, number of
documents processed, population served, and
the like) and (ii) it is common to the
benefiting functions during the base period,
d, Except where R special indirecl cost
raters) is required in accordance with
I
I
46026
Federal Register / Vol. 45, No. 132 / Tuesday, July 8, 1980 / Notices
paragraph 0.5. below. the separate groupings
of indirect costs allocated to each major
funclion shall be aggregated and treated as a
common pool for that function, The costs in
the common pool shall then be distributed to
individual awards included in that function
by use of a single indirect cost rate,
e. The distribution base used in computing
the indirect cost rate for each function may
be total direct costs (excluding capital
expenditures and other distorting items such
as major subcontracts and subgrants). direct
salaries and wages, or other base which
results in an equitable distribution, The
distribution base shall generally exclude
participant support costs as defined in
paragraph 29. Attachment B, An indirect cost
rate should be developed for each separate
indirect cosl pool developed, The rate in each
cilse should be stated as the percentage
which the amount of the particular indirect
cost pool is of the distribution base identified
with that pool.
4,Direct allocation method.
a, Some nonprofit organizations. treat all
costs as direct costs except general
administration and general expenses, These
organizations generally separate their costs
into three basic categories: (i) General
administration and general expenses. (ii)
fund rllising, and (Hi) other direct functions
(including projects performed under Federal
aWllrds), Joint costs. such llS depreciation.
rentlll costs, operlllion and maintenance of
fllcilities, telephone expenses, and the like
are prorated individually as direct costs to
each category and to each award or other
activity using a bllse most appropriate to the
particular cost being prorated,
b, This method is acceptable provided each
joint cost is prorated using a base which
accurately measures the benefits provided to
each award or other activity. The bases must
be estllblished in accordance with reasonable
criteria. and be supported by current data.
This method is compatible with the
Standards of Accounting and Financial
Reporting for Voluntary Health and Welfare
Organizations issued jointly by the National
Health Council. Inc.. the National Assembly
of Voluntary Health and Social Welfare
Organizations. llnd the United Way of
America.
c. Under this method. indirect costs consist
exclusively of general administration and
general expenses, In all other respects. the
organizlltion's indirect cost rates shall be
computed in the Sllme manner as that
described in paragraph 0,2 above.
5, Special indirect cost rates, In some
instances, a single indirect cost rate for all
activities of an organiza tion or for each major
function of the orgllnization may not be
llppropriate, since it would not take into
account those different factors which may
substantially affect the indirect costs
llPplicable to a particular segment of work.
For this purpose, a particular segment of
work may be that performed under a single
award or it may consist of work under a
groUJl of awards performed in a common
environment. The factors may include the
physical location of the work. the level of
i1dministrative support required. the nature of
the facilities or other resources employed. the
scienlific disciplines or technical skills'
involved. the organizational arrangements
used. or any combination thereof. When a
particular segment of work is performed in an
environment which appears 10 generate a
significantly different level of indirect costs.
provisions should be made for a separate
indirect cost pool applicable to such work,
The separate indirect cost pool should be
developed during the course of the regular
allocation process. and the separate indirect
cost rate resulting therefrom should be used
provided it is determined that (i) the rate
differs significantly from that which would
have been obtained under paragraph 0,2. 3.
and 4 above. and (ii) the volume of work to
which the rate would apply is material.
E. Negotiation and Approval of Indirect Cost
Rates,
1, Definitions, As used in 'this section, the
following terms have the meanings set forth
below:
a, "Cognizant agency" means the Federal
agency responsible for negotiating and
approving indirect cost rates for a nonprofit
organization on behalf of all Federal
agencies.
b, "Predetermined rate" means an indirect
cost rate, applicable to a specified current or
future period. usually the organization's fiscal
year, The rate is based on an estimate of the
costs to be incurred during the period, A
predetermined rate is not subject to
adjustment.
c, "Fixed rate" means an indirect cosl rate
which has the same characteristics as a
predetermined rate. except that the difference
between the estimated costs and the actual
costs of the period covered by the rate is
carried forward as an adjustment to the rate
computation of a subsequent period,
d, "Final rate" means an indirect cost rate
applicable to a specified past period which is
based on the actual costs of the period, A
final rate is not subject to adjustment.
e. "Provisional rate" or billing rate means a
temporary indirect cost rate applicable to a
specified period which is used for funding,
interim reimbursement. and reporting indirect
costs on awards pending the establishment of
a final ra te for the period.
f. "Indirect costproposal" means the
documentat'ion prepared by an organization
to substantiate its claim for the
reimbursement of indirect costs. This
proposal provides the basis for the review
and negotiation leading to the establishment
of an organization's indirect cost rate.
g. "Cost objective" means a function,
organizational subdivision. contract, grant. or
other work unit for which cost data are
desired and for which provision is made to
accumulate and measure the cost of
processes. projects, jobs and capitalized
projects,
2. Negotiation and approval of rates,
a, Unless different arrangements are
agreed to by the agencies concerned, the
Federal agency with the largest dollar value
of awards with an organization will be
designated as the cognizant agency for the
negotiation and approval of indirect cost
rates and. where necessary. other rales such
as fringe henefit and computer charge-out
rates, Once an agency is assigned cognizance
for a particular nonprofit organization. the
assignment will not be changed unless there
is a major long.term shift in the dollar volume
of the Federal awards to the organization, All
concerned Federal agencies shall be given the
opportunity to participate in the negotilltion
process, but after a ra te has been agreed
upon it will be accepted by all Federal
agencies, When a Federal agency has reason
to believe that special.operating factors
affecting its awards necessitate special
indirect cosl rates in accordance with
paragraph D,S above, it will. prior to the time
the rates are negotiated, notify th~ cognizant
agency,
b, A nonprofit organization which has not
previously established an indirect cost rate
with a Federal agency shall submit its initial
indirect cost proposal to the cognizant
agency, The proposal shall be submitted i1S
soon as possible after the organiza tion is
advised thai an award will be made and, in
no event. Iii tel' than three months after tlw
effective date of the award,
c, Organizations that have previuusly
established indirect cost rates must submit a
new indirecl cost proposal to the cogniwnt
agency within six months i1fter the close of
each fiscal year.
d. A predetermined rille may be negotiated
for use on awards where there is reasonable
assurance, based on past experience and
reliable projection of the organization's costs.
that the rate is not likely to exceed a rate
based on the organization's actual costs,
e, Fixed rates may be negotiated where
predetermined rates are n~t considered
appropriate, A fixed rate, however. shall nol
be negotiated if (i) all or a substantial portion
of the organization's awards are expecled to
expire before the carry,forward adjustment
can be made: (ii) the mix of Go\.ernmenl and
non,government work at the organization is
too erratic to permit an equitable carry-
forward adjustment; or (iii) the organization's
operations fluctuate significantly from year to
year.
f. Provisional and final rates shall be
negotiated where neither predetermined nor
fixed rates are appropriate,
g, The results of each negotiation shilll be
formalized in a written agreement between
the cognizant agency and the nonprofit
organization, The cognizant agency shall
distribute copies of the agreement to all
concerned Federal agencies,
h, If a dispute arises in a negotiation of an
indirect cost rate between the cognizant
agency and the nonprofit organization. the
dispute shall be resolved in accordance with
the appeals procedures of the cognizant
agency.
i. To the extent that problems are
encountered among the Federal agencies in
connection with the negotiation and approval
process, the Office of Management and
Budget will lend assistance as required to
resolve such problems in a timely manner,
[Circular No, A-122]
Allachmenl B
Selected lIems of Cosl
Table of Contents
1, Advertising costs
2, Bad debts
3. Bid and proposal costs (reserved)
I
I
Federal Register / Vol. 45, No. 132 / Tuesday, July 8. 1980 / Notices
46027
4. Bonding costs
5, Communication costs
6, Compensation for personal services
7, Contingency provisions
6, Contributions
9, Depreciation and use allowances
10, Donations
11. Employee morale, heallh and welfare
costs and credits
12. Entertainment costs
13, Equipment and other capital expenditures
14. Fines and penallies
15, Fringe benefits
16, Idle facilities and idle capacity
17. Independent research and development
(reservedJ
16, Insurance and indemnification
19, Interest, fund raising. and investment
management costs
20, I.abor relalions costs
21. Losses on other awards
22, Maintenance and repair costs
23, Malerials and supplies
24, Meetings. conferences
25, Memberships, subscriptions. and
professional activity costs
26, Organization cosls
27, Overtime, extra'pay shift. and multishift
premiums
26, Page charges in professional journals
29, Participant support costs
30, Pa tent costs
31, Pension plans
32, Plant security costs
33, Preawnrd costs
34. Professional service costs
35, Profits and losses on disposition of
depreciable property or other capital
assets '
36, Puhlic information service costs
37, Publication and printing costs
38. Rearrangement and alleration costs
39, Reconversion costs
40, Recruiling costs
41. Relucation costs
42, Renlal costs
43, Royalties and other costs for use of
patents and copyrights
44, Severance pay
45, Specialized service facilities
46, Taxes
47, Termination costs
48, Training and education costs
49, Transporlation costs
50, Travel costs
ICircular No, A-122]
AlIachment B
'Selected Items of Cost
Paragraphs 1 through 50 provide principles
10 be applied in establishing the allowabiIity
of cerlain items of cost. These principles
apply whelher a cost is treated as direct or
indirect. Failure to mention a particular item
of cosl is not intended to imply that it is
unllllowahle; rather determination as to
allowability in each case should be based on
the treatmenl or principles provided for
similar or related items of cost.
1. 1Ic1.'ertisi/lM custs,
ii, Advertising costs mean the costs of
media services and associated costs, Media
udvertising includes magazines. newspapers.
nHJio and television programs. direct mail.
exhihits, and the like,
b, The only advertising costs allowable are
those which are solely for (i) the recruitment
of personnel when considered in conjunction
with all other recruitment costs. as set forth
in paragraph 40; (ii) the procurement of goods
and services; (iii) the disposal of surplus
materials acquired in the performance of the
award except when organizations are
reimbursed for disposals at a predetermined
amount in accordance with Attachment N of
OMB Circular A-110; or (iv) specific
requirements of the award,
2, Bad debts, Bad debts, including losses
(whether actual or estimated) arising from
uncollectible accounts and other claims,
related collection costs, and related legal
costs, are unallowable,
3, Bid and proposal costs, (reserved)
4, Bonding costs,
a, Bonding costs arise when the
Government requires assurance against
financial loss to itself or others by reason of
the act or default of the organization, They
arise also in instances where the organization
requires similar assurance. Included are such
bonds as bid, performance, payment.
advance payment, infringement, and fidelity
bonds.
b, Costs of bonding required pursuant to
the terms df the award are allowable,
c. Costs of bonding required by the
organization in the general conduct of its
operations are allowable to the extent that
such bonding is in accordance with sound
business practice and the rates and premiums
are reasonable under the circumstances.
S. Communication costs, Costs incurred for
telephone services, local and long distance
telephone calls, telegrams, radiograms,
postage and the like, are allowable,
6, Compensation for personal services,
a. Definition. Compensation for personal
services includes all compensation paid
currently or accrued by ihe organization for
services of employees rendered during the
period of the award (except as otherwise
provided in paragraph g. below). It includes,
but is not limited to, salaries, wages,
director's and executive committee member's
fees, incentive awards, fringe benefits,
pension plan costs, allowances for off-site
pay, incentive pay, location allowances,
hardship pay, and cost of living differentia,ls,
b, Allowability, Except as otherwise
speCifically provided in this paragraph, the
costs of such compensation are allowable to
the extent that:
(1) Total compensation to individual
employees is reasonable for the services
rendered and conforms to the established
policy of the organization .consistently
applied to both Government and non-
Government activities; and
(2) Charges to awards whether treated as
direct or indirect costs are determined and
supported as required in this paragraph,
c. Reasonableness.
(t) When the organization is predominantly
engaged in activities other than those
sponsored by the Government, compensation
for employees on Government,sponsored
work will be considered reasonable to the
extent that it is consistent with that paid for
similar work in the organization's other
activities,
(2) When the organization is predominantly
engaged in Government-sponsored activities
and in cases where the kind of employees
required for the Government activities are
not found in the organization's other
activities, compensation for employees on
Government-sponsored work will be
considered reasonable to the ex ten I thai it is
comparable to that paid for similar work in
the labor markets in which the organization
competes for the kind of employees involved,
d, Special considerations in determining
allowability, Certain conditions require
special consideration and possible limitations
in determining costs und.er Federal awards
where amounts or types of compensation
appear unreasonable, Among such conditions
are the following:
(lJ Compensation to members of nonprofit
organizations. trustees, dirp.ctors, associates,
officers, or the immediate families thereoL
Determination should be made that such
compensation is reasonable for the aclual
personal services rendered rather than a
distribution of earnings in excess of cosls,
(2) Any change in an organization's
compensation policy resulting in a
substantial increase in the organization's.
level of compensation, particularly when it
was concurrent with an increase in the ratio
of Government awards to other activities of
the organization or any change in the
treatment of allowability of specific types of
compensation due to changes in Government
policy,
e, Unallowable costs, Costs which are
unallowable under other paragraphs of this
Attachment shall not be allowable under this
paragraph solely on the basis that they
constitute personal compensation.
L Fringe benefits,
(1) Fringe benefits in the form of regular
compensation paid to employees during
periods of authorized absences from the job,
such as vacation leave, sick leave, military
leave, and the like, are allowable provided
such costs are absorbed by all organization
activities in proporlion to the relative amount
of time or effort actually devoted to each,
(2J Fringe benefits in the form of employer
contributions or expenses for social security,
employee insurance, workmen's
compensation insurance, pension plan costs
(see paragraph g, belowJ, and the like. are
allowable provided such benefits are granted
in accordance with established written
organization policies, Such benefits whether
treated as indirect cosls or as direct cosls,
shall be distributed to particular awards and
other activities in a manner consistent with
the pa Itern of benefits accruing to the
individuals or group of employees whose
salaries and wages are chargeable to such
awards and other activilies,
(3)(a) Provisions for a reserve under a self,
insurance program for unemployment
compensation or workers' compensation are
.allowable to the extent that the provisions
represent reasonable estima tes of the
liabilities for such compensation, and the
types of coverage, extent of coverage, and
rates and premiums would have been
allowable had insurance been purchased to
cover the risks, However. provisions for seif-
insured liabilities which do not become
payable for more than one year after Ihe
provision is made shall not exceed the
present value of Ihe liability,
I
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46028
Federal Register / Vol. 45. No. 132 / Tuesday. July 8. 1980 / Notices
(b) Where an organization follows a
consistent policy of expensing actual
payments to. or on behalf of, employees or
former employees for unemployment
compensation or workers' compensation,
such payments are allowable in the year of
payment with the prior approval of the
awarding agency provided they are allocated
to all activities of the organization,
(4) Costs of insurance on the lives of
trustees. officers. or other employees holding
positions of similar responsibility are
allowable only 10 the extent that the
insurance represents additional
compensation. The costs of such insurance
when the organization is named as
beneficiary are unallowable,
g. Pension pIon costs,
(1) Costs of the organization's pension plan
which are incurred in accordance with the
established policies of the organization are
allowable, provided:
(a) Such policies meet the test of
reasona bleness;
(b) The methods of cost allocation are not
discriminatory;
(c] The cost assigned to each fiscal year is
determined in accordance with generally
accepted accounting principles as prescribed
in Accounting Principles Board Opinion No.6
issued by the American Institute of Certified
Public Accountants; and
(d) The costs assigned to a given fiscal year
are funded for all plan participants within six
months after the end of that year. However,
increases to normal and past service pension
costs caused by a delay in funding the
actuarial liability beyond 30 days after each
qua'rter of the year to which such costs are
assignable are unallowable,
(2) Pension plan termination insurance
premiums paid pursuant to the Employee
Retirement Income Security Act of 1974 (Pub.
L 93-406) are allowable. Late payment
charges on such premiums are unallowable,
(3) Excise taxes on accumulated funding
deficiencies and other penalties imposed
under the Employee Retirement Income
Security Act are unallowable.
h, Incentive compensation. Incentive
compensation to employees based on cost
reduction, or efficient performance,
suggestion awards, safety awards, etc., are
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 organization and the employees
before the services were rendered, or
pursuant to an established plan followed by
the organization so consistently as to imply.
in effect. an agreement to make such
payment.
i. Overtime, extra pay shift, and multishift
premiums. See paragraph 27,
j, Severance pay. See paragraph 44,
k, Training and education costs. See
paragraph 46.
I. Suppart of salaries and wages,
(1) Charges to awards for salaries and
wages, whether trea ted as direct costs or
indirect costs. will be based on documented
payrolls approved by II responsible official(s)
of the or~anization, The distribution of
salaries and wages to awards must be
supported by personnel activity reports as
prescribed in subparagraph (2) below, except
when a substitute system has been approved
in writing by the the cognizant agency. (See
paragraph E,2 of Allachment A)
(2) Reports reflecting the distribution of
activity of each employee must be
maintained for all staff members
(professionals and nonprofessionals) whose
compensation is charged, in whole or in part,
directly to awards. In addition, in order to
support the allocation of indirect costs, such
reports must also be maintained for other
employees whose work involves two or more
funcitons or activities if a distribution of their
compensation between such functions or
activities is needed in the determination of
the organization's indirect cost rate(s) (e.g.,
an employee engaged part,time in indirect
cost activities and part,time in a direct
function), Reports maintained by nonprofit
organizations to satisfy these requirements
must meet the following standards:
(a] The reports must reflect an after-the,
fact determination of the actual activity of
each employee. Budget estimates (Le"
estimates determined before the services are
performed] do not qualify as support for
charges to awards,
(b) Each report must account for the total
activity for which employees are
compensated and which is required in
fulfillment of their obligations to the
organiza tion,
(c) The reports must be signed by the
individual employee, or by a responsible
supervisory official having first hand
knowledge of the activities performed by the
employee, that the distribution of activity
represents a reasonable estimate of the
actual work performed by the employee
during the periods covered by the reports.
(d) The reports must be prepared at least
monthly and must coincide with one or more
pay periods.
(3) Charges for the salaries and wages of
nonprofessional employees, in addition to the
supporting documentation described in
subparagraphs (1) and (2) above, must also
be supported by records indicating the total
number of hours worked each day
maintained in conformance with Department
of Labor regulations implementing the Fair
Labor Standards Act (29 CFR Part 516). For
this purpose, the term "nonprofessional
employee" shall have the same meaning as
"nonexempt employee," under the Fair Labor
Standards Act
(4) Salaries and wages of employees used
in meeting cost sharing or matching
requirements on awards must be supported in
the same manner as salaries and wages
claimed for reimbursement from awarding
agencies.
7, Contingency provisions, Contributions to
a contingency reserve or any similar
provision made for events the occurrence of
which cannot be foretold with certainty as to
time, intensity, or with an assurance of their
happening, are unallowable. The term
"contingency reserve" excludes self-
insurance reserves (see paragraph 6J.(3) and
18,a,(2}[d)); pension funds (see paragraph
6,(g)); and reserves for normal severance pay
(see paragraph 44,(b)[1}.
6, Contributions, Contributions and
donations by the organization to others are
unallowable.
9. Depreciotion and use allowonces.
a, Compensation for the use of buildings,
other capital improvements, and equipment
on hand may be made through use
allowances or depreciation, However, except
as provided in paragraph f. below a
combination of the two methods may not be
used in connection with a single class of
fixed assets (e,g" buildings, office equipmenC
computer equipment, etc,),
b, The computation of use allowances or
depreciation shall be based on the
acquisition cost of the assets involved. The
acquisition cost of an asset donated to the
organization by a third party shall be its fair
market value at the time of the donation,
c. The computation of use allowances or
depreciation will exclude,
(1) The cost of land;
(2) Any portion of the cost of buildings and
equipment borne by or donated by the
Federal Government irrespective of where
title was originally vested or where it
presently resides; and
(3) Any portion of the cost of buildings and
equipment contributed by or for the
organization in satisfaction of a statutory
matching retirement.
d. Where the use allowance method is
followed, the use allowance for buildings and
improvement (including land improvements
such as paved parking areas, fences, and
sidewalks) will be computed at an annual
rate not exceeding two percent of acquisition
cost The use allowance for equipment will
be computed at an annual rate not exceeding
six and two,thirds percent of acquisition cost.
When the use allowance method is used for
buildings, the entire building must be treated
as a single asset; the building's components
(e.g, plumbing system, heating and air
conditioning, etc,) cannot be segregated from
the building's shell. The two percent
limitation, however, need not be applied to
equipment which is merely attached or
fastened to the building but not permanently
fixed to it and which is used as furnishings or
decorations or for specialized purposes (e,g"
dentist chairs and dental treatment units,
counters, laboratory benches boiled to the
floor, dishwashers, carpeting, etc,), Such
equipment will be considered as not being
permanently fixed to the building if it can be
removed without the need for costly or
extensive alterations or repairs to the
building or the equipment. Equipmenlthat
meets these criteria will be subject to the six
and two-thirds percent equipment use
allowance limitation,
e. Where depreciation method is followed,
the period of useful service (useful life)
established in each case for usable capital
assets must take into considera tion such
factors as type of construction, nature of the
equipment used, technological developments
in the particular program area, and the
renewal and replacement policies followed
for the the individual items or classes of
assets involved, The method of depreciation
used to assign the cost of an asset (or group
of assets] to accounting periods shall renect
the pattern of consumption of the asset
during its useful life, In the absence of clear
evidence indicating that the expected
consumption of the asset will be significantly
greater or lesser in the early portions of its
Federal legister
useful life Ihan in Ihe later portions. the
straight,line method shall be presumed to be
the appropriate method, Deprecialion
methods once used shall not be changed
unless approved in advance by the cognizant
Federal agency, When the depreciation
method is introduced fur application 10 assets
previuusly subject tu a lIse allowance. the
combination of use allowances and
depreciatiun applicable to such assets mllsl
not exceed the total acquisilion cost of the
assels, When the depreciation method is used
for buildings, a building's shell may be
segregaled frum each building component
(e,g,. plumbing system, heating. and air
conditiuning syslem, etc,) and each item
depreciated uver ils eSlimaled useful life: or
the entire building (i,e,. the shell and all
components) may be treated as a single asset
and depreciated uver a single useful life,
f. When the depreciation method is used
for a particular class of assets. no
depreciation may be allowed on any such
assels thai, under paragraph e, above, would
be viewed as fully depreciated, Ilowever. a
reasonable use allowance may be negotiated
for such assets if warranted after taking into
consideration the amount of deprecialion
previously charged 10 the Government. the
estimated useful life remaining at lime of
negutiatiun. the effect of any increased
maintenance charges or decreased efficiency
due to age, and any olher faclors pertinent to
the utilization of the asset for the purpose
contemplaled,
g, Charges for use allowances or
depreciation must be supported by adequate
property records and physical inventories
must be taken at least once every two years
(a statistical sampiing basis is acceptable) to
ensure thai assets exist and are usable and
needed, When Ihe depreciation method is
followed, adequate depreciation records
indicating the amount of depreciation taken
each period must also be maintained,
10, Donations
a, Sen'ices received.
(1) Donated or volunteer services may be
furnished to an organization by professional
and technical personnel. consultants. and
other skilled and unskilled labor. The value
of these services is not reimbursable either as
a direct or indirect cost.
(2) The value of dona ted services utilized
in the performance of a direct cost activity
shall be considered in the determination of
the organization's indirect cost rate(s) and.
accordingly. shall be allocated a
'proportionate share of applicable indirect
costs when the following circumstances exist:
(a) The aggregate value of the services is
material:
[bJ The services are supporled by a
significant amount of the indirect costs
incurred by the organization;
[c) The direct cost activity is not pursued
primarily for the benefit of the Federal
Government.
(3) In those instances where there is no
basis for determining the fair market value of
the services rendered, Ihe recipient and the
cognizant agency shall negotiate an
appropriate allocation of indirect cost to the
services,
(4) Where donated services directly benefit
a pruject supported by an award, the indirect
I
/ Vol. 45, No. 132 / Tuesday. July 8.
eostn allocated to the services will be
considered 8S a part of the total costs of the
project. Such indirect costs may be
reimbursed under the award or used to meet
cost sharing or matching requirements,
(5J The value of the donated services may
be used to meet cost sharing or matching
requirements under conditions described in
Allachment E. OMB Circular No, A-ll0.
Where donated services are treated as
indirect costs. indirect cost rates will
separate the value of the donations so that
reimbursement will not be made,
(6) Fair market value of donated services
shall be computed as fullows:
(aJ Rates for volunteer services, Rates for
volunteers shall be consistent with those
regular rates paid for similar work in other
activities of the organization, In cases where
the kinds of skills involved are not found in
Ihe other activities of the organizalion. the
rates used shall be consistent with those paid
for similar work in the labor market in which
the organization competes for such skills,
(b) Services donated by other
organizations, When an employer donates
the services of an employee. these services
shall be valued at the employee's regular rate
of pay (exclusive of fringe benefits and
indirect costs) provide!l the services are in
the same skill for which the employee is
normally paid. If the services are not in the
same skill for which the employee is normally
paid. fair market value shall be computed in
accordance with subparagraph (a) above,
b. Goods and space,
(1) Donated goods: i.e.. expendable
personal property/supplies. and donated use
of space may be furnished to an organization,
The value of the goods and space is not
reimbursable 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 conditions described
in Attachment E, OMB Circular No. A-ll0.
The value of the donations shall be
determined in accordance with Attachment
E. Where donations are treated as indirect
costs. indirect cost rates will separate the
value of the donations so that reimbursement
will not be made.
11. Employee morale. health. and welfare.
costs and credits, The costs of house
publications. health or first-aid clinics. and/
or infirmaries. recreational activities.
employees' counseling services. and other
expenses incurred in accordance with the
organization's established practice or custom
for the improvement of working conditions.
employer-employee relations. employee
morale. and employee performance are
allowable. Such costs will be equitably
apportioned to all activities of the
organization, Income generated from any of
these activities will be credited to the cost
thereof unless such income has been
irrevocably set over to employee welfare
organizations,
12, Entertainment costs, Costs of
amusement. diversion. social activities.
ceremonials. and costs relating thereto. such
as meals. lodging. rentals. transportation. and
gratuities are unallowable (but see
paragraphs 11 and 25),
13, Equipment and other capital
expenditures,
1980 / Notices
46029
a, As used in this paragraph. the following
terms have the meanings set forth below:
[1) "Equipment" means an article of
nonexpendable tangible personal property
having a useful life of more than two years
and an acquisition cosl of $500 or more per
unit. An organization may use its own
definition provided that it at least includes all
nonexpendable tangible personal property as
defined herein,
(2) "Acquisition cost" means the net
invoice unit price of an item of equipment.
including the cost of any modifications.
attachmenls, accessories. or auxiliary
apparatus necessary to make it usable for the
purpose fur which i I is acquired, Ancillary
charges, such as taxes, duty, protective in,
transil insurilllce, freight. and installation
shall be included in or excluded from
acquisition cost in accurdance with the
organization's regular wrillen accounting
practices.
(3) "Special purpose equipment" means
equipment which is usable only for research.
medical. scientific. or technical activities,
Examples of special purpose equipment
include microscopes. x-ray machines. surgical
instruments. and spectrometers,
(4J "General purpose equipment" means
equipment which is usable fur olher than
research. medical. scientific. or technical
activities. whether or not special
modifications are needed to make them
suitable for a particular purpuse, Examples of
general purpose equipment include office
equipment and furnishings. air conditioning
equipment, reproduction and printing
equipment. motor vehicles. and automatic
data processing equipment.
b. (1) Capital expenditures for general
purpose equipment are unalluwable as a
direct cost except with the prior approval of
the awarding agency,
[2) Capital expenditures for special purpose
equipment are allowable as direct costs
provided that items with a unit cost of $1000
or more have the prior approval of the
awarding agency,
c. Capital expenditures for land or
buildings are unallowable as a direct cosl
except with the prior approval of the
awarding agency,
d, Capital expenditures for improvements
to land, buildings. or equipment which
materially increase their value or useful life
are unallowable as a direct cost except with
the prior approval of the awarding agency,
e, Equipment and other capital
expenditures are unallowable as indirect
costs, However, see paragraph 9 for
allowability of use allowances or
depreciation on buildings. capital
improvements, and equipment. Also, see
paragraph 42 for allowability of rental costs
for land, buildings, and equipment.
14, Fines and pellolties. Costs of fines and
'penalties resulting from viola tions of. or
failure of the organization to comply with
Federal. State. and local laws and regulations
are unallowable except when incurred as a
result of compliance with specific provisions
of an award or instructions in writing from
the awarding agency,
15, Fringe benefits, See paragraph 6, f.
16, Idle facilities and idle capacity.
a, As used in this paragraph the following
terms have the meanings set forth below:
,
46030
Federal Register / Vol. 45, No. 132 / Tuesday, July 8, 1980 / Notices
I
(1) "Facilities" mellns land and buildings or
any portion thereof. equipment individually
or collectively. or any other tangible capital
assel. wherever located. and whether owned
ur leased by the organization,
(2) "Idle facilities" means completely
unused facilities that are excess to the
organization's current needs,
(;j) "Idle capacity" means the unused
capacity of partially used facilities, It is the
difference between that which a facility
could achieve under 100 per cent opera ting
time on a one.shift basis less operating
interruptions resulting from time lost for
repairs, setups. unsatisfactory materials, and
other normal delays, and the extent to which
the facility was actually used to meet
demands during the accounting period, A
multishirt basis may be used if it can be
shown that this amount of usage could
normally be expected for the type of facility
involved,
(4) "Costs of idle facilities or idle capacity"
means costs such as maintenance. repair,
housing, rent, and other related costs; e,g.,
property taxes. insurance. and depreciation
or use allowances,
b, The costs of idle facilities are
unallowable except to the extent that:
(1) They are necessary to meet fluctuations
in workload: or
(2) Although not necessary to meet
fluctuations in workload. they were
necessary when acquired and are now idle
because of changes in program requirements.
efforts to achieve more economical
operations, reorganization. termination, or
other causes which could not have been
reasonably foreseen. Under the exception
stated in this subparagraph. costs of idle
facilities are allowable for a reasonable
period of time. ordinarily not to exceed one
year. depending upon the initiative taken to
use. lease. or dispose of such facilities (but
see paragraphs 47,0. and d,),
c, The costs of idle capacity are normal
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 the capacity is
reasonably anticipated to be necessary or
was originally reasonable and is not subject
to reduction or elimination by subletting,
renting. or sale. in accordance with sound
business. economics, or security practices,
Widespread idle capacity throughout an
entire facility or among a group of assets
having substantially the same function may
be idle facilities.
17. Independent research and development
[Reserved).
18. Insurance and indemnification.
a, Insurance includes insurance which the
organization is required to carry, or which is
approved. under the terms of the award and
any other insurance which the organization
maintains in connection with the general
conduct of its operations, This paragraph
does not apply to insurance which represents
fringe benefits for employees [see paragraph
6.1, and 6,g,(2)),
(1) Costs of insurance requimd or
approved. and maintained, pursuant to the
award are allowable,
(2) Costs of other insurance maintained by
the organization in connection with the
general conduct of its operations are
allowable subject to the following limitations,
(a) Types and extent of coverage shall be
in accordance with sOl!nd business practice
and the rates and premiums shall be
reasonable under the circumstances,
(b) Costs allowed for business interruption
or other similar insurance shall be limited to
exclude coverage of management fees,
(c) Costs of insurance or of any provisions
for a reserve covering the risk of loss or
damage to Government property are
allowable only to the extent thai the
organization is liable for such loss or damage.
(d) Provisions for a reserve under a self,
insurance program are allowable to the
extent that types of coverage. extent of
coverage, rates. and premiums would have
been allowed had insurance been purchased
to cover the risks, However. provision for
known or reasonably estimated self,insured
liabilities, which do not become payable for
more than one year after the provision is
made shall not exceed the present value of
the liability,
(e) Costs of insurance on the lives of
trustees, officers, or other employees holding
positions of similar responsibilities are
allowable only to the extent that the
insurance represents additional
compensation (see paragraph 6), The cost of
such insurance when the organizatio:1 is
identified as the beneficiary is unallowable,
(3) Actual losses which could have been
covered by permissible insurance (through
the purchase of insurance or a self-insurance
program) are unallowable unless expressly
provided for in the award, except:
[a) Costs incurred because of losses not
covered under nominal deductible insurance
coverage provided in keeping with sound
business practice are allowable,
(b) Minor losses not covered by'insurance,
such as spoilage, breakage, and
disappearance of supplies, which occur in the
ordinary course of operations, are allowable.
b. Indemnification includes securing the
organization against liabilities to third
persons and any other loss or damage, not
compensated by insurance or otherwise, The
Government is obligated to indemnify the
organization only to the extent expressly
provided in the award.
19, Interest, fund raising. and investment
management costs.
a, Costs incurred for interest on borrowed
capital or temporary use of endowment
funds. however represented, are unallowable.
b. Costs of organized fund raising,
including financial campaigns, endowment
drives. solicitation of gifts and bequests, and
similar expenses incurred solely to raise
capital or obtain contributions are
unallowable,
c. Costs of investment counsel and staff
and similar expenses incurred solely to
enhance income from investments are
unallowable.
d. Fund raising and investment activities'
shall be allocated an appropriate share of
indirect costs under the conditions described
in paragraph B of Allachment A.
20, Labor relations costs, Costs incurred in
maintaining satisfactory relations between
the organization and its employees, including
costs of labor management committees.
employee publications, and other related
activities are allowable,
21, Losses on other awards, Any excess of
costs over income on any award is
unallowable as a cost of any other award,
This includes, but is notlimiled to, the
organization's contributed portion by reason
or cost sharing agreements or any
underrecoveries through negotiation of lump
sums for. or ceilings on, indirect costs,
22, Maintenance and repair costs, ,Costs
incurred for necessary maintenance, repair,
or upkeep of buildings and equipment
(including Government property unless
otherwise provided for) which neither add to
the permanent value of the property nor
appreciably prolong its intended life, bul
keep it in an efficient operating cowJilion, are
allowable, Costs incurred for ifTlprc."'nwnls
which add to the permanent value of the
buildings and equipment or appreciably
prolong their intended lire shall be treated as
capilal expenditures (see paragraph 13),
23, Materials and supplies, The costs of
materials and supplies necessary to carry out
an award are allowable, Such costs should be
charged at their actual prices after deducting
all cash discounts, trade discounts, rebates,
and allowances received by the organiza lion,
Withdrawals from general stores or
stockrooms should be charged at cosl under
any recognized method or pricing
consistently applied, Incoming transportation
charges may be a proper part of material
cosL Materials and supplies chargeu as a
direct cost should include only the materials
and supplies actually used for the
performance of the contract or grant. and due
credit should be given for any excess
materials or supplies retained, or returned to
vendors,
24, Meetings, conferences,
a, Costs associated with the conduct of
meetings and conferences, include the cost of
renting facilities, meals, speakers' fees, and
the like, But see paragraph 12, Entertvil/l/lent
costs. and paragraph 29. Participant suppvrt
costs,
b, To the extent that these cosls al'l~
identifiable with a particular cost objective,
they should be charged 10 that objective, (See
paragraph B. of Allachment A,) These costs
are allowable provided that they meet the
general tests of allowability, shown in
Allachment A to this Circular,
c, Costs of meetings and conferences held
to conduct the general administration of the
organization are allowable,
25, Memberships, subSCrIptions, and
professional activity costs,
a, Costs of the organization's membership
in civic, business, technical and professional
organizations are allowable,
b. Costs of the organization's subscriptions
to civic, business. professional. and technical
periodicals are allowable,
c, Costs of allendance at meetings and
conferences sponsored by others when the
primary purpose is the dissemination or
technical informalion, are allowable, This
includes costs of meals, transportation, and
other items incidental to such attendance,
26, Organization costs, Expenditures, such
as incorporation fees, brokers' fees, fees tu
promoters. organizers or management
consultants, allorneys, accountants, or
I
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Federal Register I Vol. 45, No, 132 I Tuesday, July 8, 1980 I Notices
46031
investment counselors. whether or not
employees of the organization. in connection
wilh establishment or reorganization of an
organization. are unallowable except with
prior approval of the awarding agency.
27. Overtime. extra-pay shift, and
multishlft premiums, Premiums for overtime.
extra'pay shifls. and mullishifl work are
allowable only wilh the prior approval of the
awarding agency excepl:
8, When necessary to cope with
emergencies. such as those resulling from
accidents. nalural disasters. breakdowns of
equipment. or occasional operational
bOlllenecks of a sporadic nature.
b, When employees are performing indirect
functions such as administration.
maintenance. or accounting,
C, In the performance of tests. laboratory
procedures. or other similar operations which
'are continuous in nature and cannot
reasunably be interrupted ur otherwise
complel!!d,
d,When lower overall cost to the
Government will result.
28, Page charges III professianal journals,
Page charges for professional journal
publications are allowable as a necessary
pari of research costs. where:
a, The research papers report work
supported by the Government: and
b, The charges are levied impartially on all
research papers published by the journal,
whether or nol by Government,sponsored
authors,
29, Porlicipant suppurt Gasts, Participant
support costs are direct cosls for items such
as stipends or subsistence allowances. travel
allowances. and registration fees paid to or
on behalf of participants or trainees (but not
employees) in conneclion with meetings.
conferences. symposia. or training projects.
These costs are allowable with the prior
approval of the awarding agency,
30, Patent custs,
a, Costs of Ii) preparing disclosures.
reports. and other documents required by the
award and of se'Hching the art to the extend
necessary to make such disclosures. (ii)
preparing documents and any other patent
cosls in connection with the filing and
prosecution of a United states patent
application where title or royally,free license
is required by the Government to be
conveyed to the Government. and (iii) general
counseling services relating 10 patent and
copyright mailers. such as advice on patent
and copyrighllaws. regulations. clauses, and
, employee Hgreements Hre allowable [but see
paragruph 34),
b, Cost of preparing disclosures. reports.
and other documents and of searching the art
to Ihe extent necessary to make disclosures.
if not required by the award. are
unHlIowable, Costs in con{lection with (i)
filing and prosecuting any foreign patent
application. or (ii) any United States patent
application, where the award does not
require conveying title or H royally,free
lic"nsl' to tlw (;overnnH!nl. are unallowable
(also 5"1' p;II"graph 4:J!,
31. PI'1I8i"lI plOIlS, See paragraph 6, g,
32. /'/"111 81'('lIrily cosls. Necessary
expenses incurred to comply with
Government security requirements or for
facililil!s protection, including wages.
uniforms. and equipment of personnel are
allowable.
33. Preaward costs, Preaward costs are
those incurred prior to the effective da te of
the. award directly pursuant to the
negotiation and in anticipation of the award
where such costs is necessary to comply with
the proposed delivery schedule or period of
performance, Such costs are allowable only
to the extent that they would have been
allowable if incurred after the date of the
award and only with the written approval of
the awarding agency,
34, Professional service costs,
a, Costs of professional and consultant
services rendered by persons who are
members of a particular profession or possess
a special skill. and who are not officers or
employees of the organization, are allowable.
subject to b, c, and d. of this paragraph when
reasonable in relation to the services
rendered and when not contingent upon
recovery of the costs from the Government
b, In determing the allowability of costs in
a particular case. no single factor or any
special combination of factors is necessarily
determinative, However. the following
factors are relevant:
(1) The nature and scope of the service
rend2red in relation to the service required,
(2) The necessity of contracting for the
service. considering the organization's
capability in the particular area,
(3) The past pallern of such costs.
particularly in the years prior to Government
awards,
(4) The impact of Government awards on
the organization's business (i.e.. what new
problems have arisen),
(5) Whether the proportion of Government
work to the organization's total business is
such as to influence the organization in favor
of incurring the cost. particularly where the
services rendered are not of a continuing
nature and have little relationship to work
under Government grants and contracts,
(6) Whether the service can be performed
more economically by direct employment
rather than contracting,
(7) The qualifications of the individual or
concern rendering the service and the
customary fees charged. especially on non,
Government awards.
(8) Adequacy of the contractual agreement
for the service (e,g,. description of the service,
estimate of time required. rate of
compensation. and termination provisions),
c, In addition to the factors in paragraph b
above. retainer fees to be allowable must be
supported by evidence of bona fide services
available or rendered,
d, Cost of legal. accounting. and consulting
services. and related costs incurred in
connection with defense of antitrust suits.
and the prosecution of claims against the
Government. are unallowable. Costs of legal.
accounting and consulting services. and
related costs. incurred in connection with
patent infringement litigation. organization
and reorganization. are unallowable unless
otherwise provided for in the award (but see
paragraph 47e),
35, Profits and lasses on disposition of
depreciable property or other capital assets,
a, (1) Gains and losses on sale. retirement.
or other disposition of depreciable property
shall be included in the year in which they
occur as credits or charges to cost grouping[s)
in which the depreciation applicable to such
property was included, The amount of the
gain or loss to be included as a credit or
charge to the appropriate cost grouping(s)
shall be the difference between the amount
realized on the property and the
undeprecia ted basis of the property,
(2) Gains and losses on the disposition of
depreciable property shall not be recognized
as a separate credit or char'ge under the
following conditions,
(a) The gain or loss is processed through a
depreciation reserve account and is reflected
in the depreciHtion allowilble under
paragraph 9,
[b) The property is given in exchange as
part of the purclwse price of a similar item
and the gain or loss is tilken into accounl in
determining the depreciation cost basis of the
new item,
[c) A loss results from the failure to
maintain permissible insurance, except as
otherwise provided in paragraph 11l,H,(3),
(d) Compensation for the use of the
property was provided through use
allowances in lieu of depreciation in
accordance with paragraph g,
re) Gains and losses arising from mass or
extraordinary sales, retirements, or other
dispositions shall be considered on a case,
by,case basis,
'b, Gains or losses of any nature arising
from the sale or exchange of property other
than the property covered in paragraph a.
above shall be excluded in computing award
costs,
36, Public information service costs,
a. Public information service costs include
the cost associated with pamphlets. news
releases. and other forms of information
services, Such cosls are normally incurred to:
(1) Inform or instruct individuals, groups. or
the general public,
(2) Interest individuals or groups in
participating in a service program of the
organization,
(3) Disseminate the results of sponsored
and nonsponsored activities,
b, Public information service costs are
allowable as dif'f!ct costs with the prior
approval of the awarding agency, Such costs
are unallowable as indirect costs,
37, Publication and printing costs,
a, Publication costs include the costs of
printing [including the processes of
composition, plate,milking. press work.
binding, and the end products produced by
such processes). distribution. promotion.
mailing. and general handling,
b, If these costs iHe not identifiable with a
particular cost objective. they should be
allocated as indirect costs to all benefiling
activities of the organization,
c, Publication and printing costs are
, unallowable as direct costs except with the
prior approval of the awarding agency,
d, The cost of pag<<' charges in journals is
addressed paragraph 21l,
38 ReorrallgPllIent olld oltl'mlioll costs,
Costs incurred for ordinary or normal
rearrangemenl and alteration of facilities are
allowHble, Special arrangr,nwnt and
alteration costs incurrr'd specifically for the
project are allowable with the priur approval
of the awarding agency,
,
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--
39 Reconversion costs, Costs incurred in
the restoration or rehabilitation of the
organization's facilities to approximately the
same condition existing immediately prior to
commencement of Government awards, fair
wear and tear excepted, are allowable,
40, Recruiting costs. The following
recruiting costs are allowable: cost of "help
wanted" advertising, operating costs of an
employment office, costs of operating an
educationallesting program, travel expenses
including food and lodging of employees
while engaged in recruiting personnel. travel
costs of applicants for interviews for
prospective employment, and relocation costs
incurred incident to recruitment of new
employees (see paragraph 41c), Where the
organization uses employment agencies,
costs not in excess of standard commercial
rates for such services are allowable,
41, Relocation costs,
a, Relocation costs are costs incident to the
permanent change of duty assignment (for an
indefinite period or for a stated period of not
less than 12 months) of an existing employee
or upon recruitment of a new employee,
Relocation costs are allowable, subject to the
limitation described in paragraphs b, c, and d.
below, provided that:
(1) The move is for the benefit of the
employer,
(2) Reimbursement to the employee is in
accordance with an established written
policy consistently followed by the employer.
(3) The reimbursement does not exceed the
employee's actual (or reasonably estimated)
expenses,
b, Allowable relocation costs for current
employees are limited to the following:
(1) The costs of transportation of the
employee. members of his immediate family
and his household, and personal effects to the
new location.
(2) The costs of finding a new home. such
as advance trips by employees and spouses
to locate living quarters and temporary
lodging during the transition period, up to a
maximum period of 30 days, including
advance trip time,
(3) Closing costs, such as brokerage, legal,
and appraisal fees, incident to the disposition
of the employee's former home, These costs,
together with those described in (4) below,
are limited to 8 per cent of the sales price of
the employee's former home,
(4) The continuing costs of ownership of
the vacant former home afler the setllement
or lease dale of the employee's new
permanent home, such as maintenance of
buildings and grounds (exclusive of fixing up
expenses), utilities, taxes, and property
insurance,
(5) Other necessary and reasonable
expenses normally incident to relocation,
such as the costs of cancelling an unexpired
lease. disconnecting and reinstalling
household appliances. and purchasing
insurance against loss of or damages to
pl'rsllnal property, The cost of cancelling an
unl,xpired lease is limited to three times the
monthly rental.
c, Allowable relocation costs for new
employees are limited to those described in
(11 and 12) of paragraph b, above, When
relocal illn costs incurred incident to the
n,c:ruitnwnt of new employees have been
allowed either as a direct or indirect cost and
the employee resigns for reasons within his
control within 12 months after hire, the
organization shall refund or credit the
Government for its share of (he cost.
However, the costs of travel to an overseas
location shall be considered travel costs in
accordance with paragraph 50 and not
relocation costs for the purpose of this
paragraph if dependents are not permitted at
the location for any reason and the costs do
not include costs of transporting household
goods,
d, The following costs related to relocation
are unallowable:
(1) Fees and other,costs associated with
acquiring a new, home.
(2) A loss on the sale of a former home.
(3) Continuing mortgage principal and
interest payments on a home being sold,
(4] Income taxes paid by an employee
related to reimbursed relocation costs,
42, Rental costs,
a, Subject to the limitations described in
paragraphs b. through d, of this paragraph,
rental costs are allowable to the extent that
the rates are reasonable in light of such
factors as: rental costs of comparable
property, if any; market conditions in the
area; alternatives available; and the type, life
expectancy, condition, and value uf the
property leased,
b, Rental costs under sale and leaseback
arrangements are allowable only up to the
amount that would be allowed had the
organization continued to own the property,
c. Rental costs under less,than-length
leases are allowable only up to the amount
thai would be allowed had title to the,
property vested in the organization, For this
purpose. a less,than,arms,length lease is one
under which one party to the lease agreement
is able to control or substantially influence
the actions of the other, Such leases include,
but are not limited to those between (i)
divisions of an organization; (ii) organizations
under common control through common
officers, directors. or members; and (iii) an
organization and a director, trustee, officer,
or key employee of the organization or his
immediate family either directly or through
corporations, trusts, or similar arrangements
in which they hold a controlling interest.
d. Rental costs under leases which create a
material equity in the leased property are
allowable only up to the amount that would
be allowed had the organization purchased
the property on the date the lease agreement
was executed; e.g., depreciation or use
allowances, maintenance, taxes, insurance
but excluding interest expense and other
unallowable costs, For this purpose, a
material equity in the property exists if the
lease in noncancelable or is cancelable only
upon the occurrence of some remote
contingency and has one or more of the
following characteristics:
(1) The organization has the right to
purchase the property for a price which at the
beginning of the lease appears to be
substantially less than the probable fair
market value at the time it is permitted to
purchase the property (commonly called a
lease with a bargain purchase option);
(2) Title to the property passes to the
organization at some lime during or after the
lease period;
(3) The term of the lease (initial term plus
periods covered by bargain renewal options,
if any) is equal to 75 per cent or more of the
economic life of the leased property; i.e., the
period the property is expected to be
economically usable by one or more users,
43, Royalties and other costs for use of
patents and copyrights,
a, Royalties on a patent or copyright or
amortization of the cost of acquiring by
purchase a copyright, patent, or rights
therelo, necessary for the proper performance
of the award are allowable unless: '
(1) The Government has a license or the
right to free use of the patent or copyright.
(2) The patent or copyright has been
adjudicated to be invalid, or has been
administratively determined to be invalid,
(3) The patent or copyright is considered to
be unenforceable,
(4) The paten I or copyright is expired,
b, Special care should be exercised in
determining reasonableness where the
royalties may have been arrived at as a result
of less then arm's length bargaining; e,g,:
(1) Royalties paid to persons. including
corporations, affiliated with the organization,
(2) Royalties paid to unaffiliated parties.
including corporations, under an agreement
entered into in contemplation thai a
Government award would be made,
(3) Royalties paid under an agreement
entered into after an award is made to an
organiza tion,
c, In any case involving a patent or
copyright formerly owned by'lhe
organization, the amount of royalty allowed
should not exceed the cosl which would have
been allowed had the organization retained
title thereto,
44, Severance pay.
a, Severance pay, also commonly referred
to as dismissal wages. is a payment in
addition to regular salaries and wages. by
organizations 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 constitutes, in effect. an implied
agreement on the organization's part, or (iv)
circumstances of the particular employment.
b, Costs of severance payments are divided
into two categories as follows:
(1) Actual normal turnover severance
payments shall be allocated to all activities;
or, where the organization provides for a
reserve for normal severances such method
will be acceptable if the charge to current
operations is reasonable in light of payments
actually made for normal severances over a
representative past period, and if amounts
charged are allocated to all activities of the
organization,
(2) Abnormal or mass severance pay is of
such a conjectural nature that measurement
of costs by means of an accrual will not
achieve equity to both parties, Thus, accruals
for this purpose are not allowable, However,
the Government recognizes its obligation 10
participate to the extent of its fair share, in
any specific payment. Thus, allowabilily will
be considered on a case-by,case basis in the
event of occurrence.
45, Specialized service facililius,
a, The costs of services provided by highly
complex or specialized facilities operated by
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Federal Register / Vol. 45, No. 132 / Tuesday, July 8. 1980 / Notices
46033
the organization. such as electronic
computers and wind tunnels, are allowable
provided the charges for the services meet
the conditions of either b, or c, of this
paragraph and. in addition. take into account
any items of income or Federal financing that
qualify as applicable credits under paragraph
A,S, of AlIachment A,
b. The costs of such services, when
material. must be charged directly to
applicable awards based on actual usage of
the services on the basis of a schedule of
rates or established methodology thaI (i) does
nol discriminate againsl federally supporled
activities of the organization, including usage
by the organization for internal purposes, and
(ii) is designed to recover only the aggregate
costs of the services, The costs of each
service shall consist normally of both its
direct costs and its allocable share of all
indirect costs, Advance agreements pursuant
to paragraph A,6, of AlIachment A are
particularly important in this situation,
c, Where the costs incurred for a service
are nol malerial. they may be allocated as
indirect costs,
46, Taxes,
a, In general. taxes which the organization
is required to pay and which are paid or
accrued in accordance with generally
accepted accounting principles. and
payments made to local governments in lieu
of taxes which are commensurate with the
local government services received are
allowable, except for (i) taxes from which
exemptions are available to the organization
directly or which are available to the
organization based on an exemption afforded
the Government and in the laller case when
the awarding agency makes available the
necessary exemption certificates. (ii) special
assessments on land which represent capital
improvements, and (iii) Federal income laxes.
b, Any refund of tilxes, and any payment to
the orgilnization of interest thereon. which
were allowed ilS aWilrd costs. will be
credited either as a cost reduction or cash
refund. ilS appropriate, to the Government
47. Termination costs, Termination of
awards generally give rise to the incurrence
of costs, or the need for special treatment of
costs, which would not have arisen had the
award not been terminated, Cost principles
covering these items are set forth below.
They are to be used in conjunction with the
other provisions of this Circular in
termination situations,
a, Commoll items, The cost of items
reasonably usaule on the organization's other
work shall not be allowable unless the
organization submits evidence that it would
not retain such items at cost without
sustaining a loss, In deciding whether such
items are reasonably usable on other work of
the organiziltion, the ilwilrding agency should
consider the orgilnization's plans and orders
for current and scheduled activity,
Contemporilneous purchases of common
items by the orgilnization shilll be regarded
as evidence that such items ilrc reilsonably
usable on the organiziltiun's other work, Any
acceptance of common items ilS allocable to
the terminall,d pori ion of Ihe award shall be
limited to the extent that the quantities of
such items on hiJlld, in transil. ilnd on order
ilJ'(~ in excess of the J'(~asonable quantitiltive
requirenH!nts of other wurk,
b, Casts continuing after terminatioll. If in
a particular case. despite all reasonable
efforts by the organization. certain costs
cannot be discontinued immediately after the
effective date of termination. such costs are
generally allowable within the limitations set
forth in this Circular. except that any such
costs continuing after termina tion due to the
negligent or willfuJ'failure of the organization
to discontinue such costs shall be
unallowable,
c, Lass of useful value, Loss of useful value
of special tooling. machinery and equipment
which was not charged to the award as a
capital expenditure is generally allowable if:
(1) Such special tooling, machinery. or
equipment is not reasonably capable of use in
the other work of the organization,
(2) The interest of the Government is
protected by transfer of title or by other
meilns deemed appropriate by the awarding
agency:
d, Rental casts, Rental costs under
unexpired leases are generally allowable
where clearly shown to have been
reasonably necessary for the performance of
the terminated award less the residuill value
of such leases, if (i) the amount of such rental
claimed does not exceed the reasonilble use
value of the property leased for the period of
the award and such further period as may be
reasonable, and (ii) the organization makes
all reasonable efforts to terminate. assign.
sellle. or otherwise reduce the cost of such
lease. There also may be included the cost of
alterations of such leased property. provided
such alterations were necessary for the
performance of the award. and of reasonable
restoration required by the provisions of the
lease,
e, Sel/lement expenses, Selllement
expenses including the following are
generally allowable: ,
(1) Accounting. legal. clerical. and similar
costs reasonably necessary for:
(a) The preparation and presentation to
awarding agency of settlement claims and
supporting data with respect to the
terminated portion of the award. unless the
termination is for default (See paragraph 4,a,
of Attachment L. OMB Circular No, A-ll0;
and
(b) The termination and selllement of
subawards,
(2) Reasonable costs for the storage.
transportation, protection, and disposition of
property provided by the Government or
acquired or produced for the award; except
when grantees are reimbursed for disposals
at a predetermined amount in accordance
with Attachment N of OMB Circular A-ll0,
(3) Indirect costs related to salaries and
wages incurred as settlement expenses in
subparagraphs (1) and (2) of this paragraph,
Normally. such indirect costs shall be limited
to fringe benefits, occupancy cost, and
immediale supervision,
f. Claims under subawards, Claims under
subawards. including the allocable portion of
claims which are common to the award, and
to other work of the organiza tion are
generally allowable, An appropriate share of
the organization's indirect expense may be
allocated to the amount of settlements with
subconlractor/subgranlees: provided that the
amount allocilted is otherwise consistent
with the basic guidelines contained in
Attachment A, The indirect expense so
allocated shall exclude the same and similar
costs claimed directly or indirectly as
settlement expenses,
48, Training and education costs,
a, Costs of preparation and maintenance of
a program of instruction including but not
limited to on,the,job, classroom, and
apprenticeship training, designed to increase
the vocational effectiveness of employees.
including training materials, textbooks.
salaries or wages of trainees (excluding
overtime compensation which might arise
therefrom), and Ii) salaries of the director of
training and staff when the trilining progmm
is conducted by the orgilnization; or (ii)
tuition and fees when the training is in an
institution not operilted by the organizution,
are allowable,
b, Costs of part,time education, al iln
undergraduate or postgraduate college level.
including that provided at the organiLation's
own facilitil~s. are illlowilble only when the
course or degree pursued is relative tu the
field in which the employee is now working
or may reasonably be expected to work, <l,nd
are limited to:
(1) Training milterials,
(2) Textbooks,
(3) Fees charges by the educationill
institution,
(4) Tuition charged by the education,,1
institution. or in lieu of tuition, instructors'
salaries and the reiated share of indirect
costs of the educational institution to the
extentthiltthe sum thereof is not in excess of
the tuition which would have ben paid tu the
participilting educatiunal institution,
(5) Salilries and related costs of instructors
who are employees of the organization,
(6) Straight-time compensation of eilch
employee for time spent attending classes
during working hours not in excess of 156 '
hours per year and only to the extent that
circumstances do not permilthwoperiltion of
classes or allendance at classes ilfter regular
working hours; otherwise such compensation
is unilllowilble,
c, Costs of tuition, fees, training materials,
and textbooks (but not subsistence, salary. ur
any other emoluments) in connection with
full,time education. including that provided at
the organization's own facilities, at a
postgraduate (but not undergraduate) college
level. are allowable only when the course or
degree pursued is related to the field in which
the employee is now working or may
reasonably be expected to work, and only
where the costs receive the prior ilpprovill of
the awarding agency, Such costs are limited
to the costs attributable to a total period not
to exceed one schoul yeilr for eilch employee
so trained, In unusual Cilses the period may
be extended,
d. Costs of allendance of up to16 weeks
per employee per year at specialized
programs specifically designed to enhilnce
the effectiveness of executives or mil nagel's
or to prepare empluyees for such positiuns
are allowable, Such costs include enrollment
fees, training milterials. textbooks and
relaled charges, employees' salaries,
subsistence. and travel. Costs allowable
under this paragraph do not include those for
courses that are pilrt of a degree,orientt,d
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Federal Register I Vol. 45. No, 132 I Tuesday. July 8. 1980 I
46034
I
Notices
curriculum. which are allowable only to the
extent set forth in b. and c, above,
e. Maintenance expense, and normal
depreciation or fair rental. on facilities
owned or leased by the organiza tion for
training purposes are allowable to the extent
set forth in paragraphs 9. 22. and 42,
f. Contributions or dona tions to
educational or training institutions. including
the donation of facilities or other properties.
and scholarships or fellowships. are
unallowable,
g, Training and education costs in excess of
those otherwise allowable under paragraphs
b, and c, of this paragraph may be allowed
with prior approval of the awarding agency.
To be considered for upproval. the
organization must demonstrate that such
costs are consistently incurred pursuant to an
establisheu training anu educatiun program.
and that' the coursa or degree pursued is
relative to the field in which the employee is
now working or may reasunably be expected
to work,
49, Transpurtation custs, Transportation
costs incluue freight. express. cartage. and
postage charges relating either to goous
purchased. in process. or delivered, These
costs are allowHbll~, When such costs can
readily be identified with Ihe items involved.
they may be directly charged as
transportation costs or added to the cost of
such items (see paragraph 23), Where
identification with the materials received
cannot readily be made. transportation costs
may be charged to the appropriate indirect
cost accounts if the organization follows a
consistent. equitable prucedure in this
respect.
50, TrUl'el costs,
a., Travel costs arc the expenses for
transportation. lodging. subsistence. and
related items incurred by employees who are
in travel status on official business of the
organization, Travel costs are allowable
subject to paragraphs b, through e, below.
when they are uirectly attributable to specific
work under an award or are incurreu in the
normal course of administration of the
organization,
b, Such costs may be charged on an actual
basis. on a per diem or mileage basis in lieu
of actual costs incurred. or on a cumbination
of the two. provided the method used results
in charges consistent with those normally
alluwed by the organization in its regular
operations,
c, The difference in cost between first,class
air accommodations and less than first,class
air accommodations is unallowable except
when less than first,class air
accommodations are not reasonably
available to meet necessary mission
requirements, such as where less than first,
class accommodations woulu (i) require
circuitous routing. (ii) require travel during
unreasonable hours. (iii) greatly increase the
duration of the fllghl. (iv) result in additional
custs which would offset the transportation
savings. or (v) offer accommodations which
are not reasonably adequate for the medical
neeus of the trav(~ler,
d, Necessary anu reasonable custs of
family J1lovenwnts anu personnel movements
uf a special or mass nature are allowable.
pursuant to paragraphs 40 and 41. subject to
allocation on the basis of work or time period
benefited when appropriate, Advance
agreements are particularly important.
e, Direct charges for foreign travel costs are
allowable only when the travel has received
prior approval of the awarding agency, Each
separate foreign trip must be approved, For
purposes of this provision. foreign travel is
defined as any travel outside of Canada and
the United States and its territories and
possessions, However. for an organization
located in foreign countries, the term "foreign
travel" means travel outside that country,
[Circular No, A-122]
Allachment C
Nonprofit Organizations not Subject to this
Circular
Aerospace Corporation. El Segundo.
California
Argonne Universities Association. Chicago.
Illinois
Associated Universities. Incorporated.
Washington. D,C,
Associated Universities for Research and
Astronomy. Tucson. Arizona
Atomic Casualty Commission. Washington.
D,C.
Battelle M('murial Institute. Headquartered in
Columbus. Ohio
Brookhaven National Laboratory. Upton.
New York
Center for Energy and Environmental
Research [CEER). (University of Puerto
Rico) Commonwealth of Puerto Rico
Charles Stark Draper Laboratory,
Incorporated. Cambridge. Massachusetts
Comparative Animal Research Laboratory
(CARL)
(University of Tennessee), Oak Ridge.
Tennessee
Environmental Institute of Michigan. Ann
Arbor. Michigan
Hanford Environmental Health Foundation.
Richland. Washington
lIT Research Institute. Chicago. Illinois
Institute for Defense Analysis. Arlington.
Virginia
Institute of Gas Technology, Chicago, Illinois
Midwest Research Institute. Headquartered
in Kansas City. Missouri
Mitre Corporation. Bedford. Massachusells
Montana Energy Research and Development
Institute. Inc" (MERDI). Butte. Montana
National Radiological Astronomy
Observatory, Green Bank. West Virginia
Oak Ridge Associated Universities, Oak
Ridge. Tennessee
Project Management Corporation. Oak Ridge.
Tennessee
Rand Corporation. Santa Monica, California
Research Triangle Institute. Research
Triangle Park. North Carolina
Riverside Research Institute. New York. New
York
Sandia Corporation. Albuquerque. New
Mexico
Southern Research Institute. Birmingham.
Alabama
Southwest Research Institute. San Antonio.
Texas
SRI International. Menlo Park. California
Syracuse Research Corporation. Syracuse.
New York
Universities Research Association.
Incorporated (National Acceleration Lab).
Argonne. Illinois
Universities Corporation for Atmospheric
Research. Boulder. Colorado
Nonprofit Insurance Companies such as Blue
Cross and Blue Shield Organizations
Other nonprofit organizations as negotiated
with awarding agencies.
IFR !Joc. 80-20270 Filed 7-7-llO; S:45 ami
BilLING CODE 3110-01-"
(Note: This reprint incorporates corrections
published at 46 FR 17185. Tuesday, March 17.
1961.)