29 PART 97--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS
AND COOPERATIVE AGREEMENTS
TO STATE AND LOCAL GOVERNMENTS
97.1 Purpose and scope of this part.
97.2 Scope of subpart.
97.5 Effect on other issuances.
97.6 Additions and exceptions.
Subpart B--Pre-Award Requirements
97.10 Forms for applying for grants.
97.11 State plans.
97.12 Special grant or subgrant conditions for "high-risk" grantees.
Subpart C--Post-Award Requirements
Financial and Program Administration
97.20 Standards for financial management systems.
97.22 Allowable costs.
97.23 Period of availability of funds.
97.24 Matching or cost sharing.
97.25 Program income.
97.26 Non-Federal audits.
Changes, Property and Subawards
97.31 Real Property.
97.35 Subawards to debarred and suspended parties.
Reports, Records, and Retention, and Enforcement
97.40 Monitoring and reporting program performance.
97.41 Financial reporting.
97.42 Retention and access requirements for records.
97.44 Termination for convenience.
Subpart D--After-The-Grant Requirements
97.51 Later disallowances and adjustments.
97.52 Collection of amounts due.
Subpart E-Entitlements [Reserved]
97.1 Purpose and scope of this part.
This part establishes uniform administrative rules for
Federal grants and cooperative agreements and subawards to State,
local and Indian tribal governments.
97.2 Scope of subpart.
This subpart contains general rules pertaining to this part
and procedures for control of exceptions from this part.
As used in this part:
"Accrued expenditures" mean the charges incurred by the
grantee during a given period requiring the provision of funds
(1) Goods and other tangible property received;
(2) Services performed by employees, contractors,
subgrantees, subcontractors, and other payees; and
(3) Other amounts becoming owed under programs for which no
current services or performance is required, such as annuities,
insurance claims, and other benefit payments.
"Accrued income" means the sum of:
(1) Earnings during a given period from services performed
by the grantee and goods and other tangible property delivered to
(2) Amounts becoming owed to the grantee for which no
current services or performance by the grantee is required.
"Acquisition cost" of an item of purchased equipment means
the net invoice unit price of the property including the cost of
modifications, attachments, accessories, or auxiliary apparatus
necessary to make the property usable for the purpose for which
it was acquired. Other charges such as the cost of installation,
transportation, taxes, duty or protective in-transit insurance,
shall be included or excluded from the unit acquisition cost in
accordance with the grantee's regular accounting practices.
"Administrative requirements" mean those matters common to
grants in general, such as financial management, kinds and
frequency of reports, and retention of records. These are
distinguished from "programmatic" requirements, which concern
matters that can be treated only on a program-by-program or
grant-by-grant basis, such as kinds of activities that can be
supported by grants under a particular program.
"Awarding agency" means (1) with respect to a grant, the
Federal agency that awarded the grant, and () with respect to a
subgrant, the party that awarded the subgrant.
"Cash contributions" means the grantee's cash outlay,
including the outlay of money contributed to the grantee or
subgrantee by other public agencies and institutions, and private
organizations and individuals. When authorized by Federal
legislation, Federal funds received from other assistance
agreements may be considered as grantee or subgrantee cash
"Contract" means (except as used in the definitions for
"grant" and "subgrant" in this section and except where qualified
by "Federal") a procurement contract under a grant or subgrant,
and means a procurement subcontract under a contract.
"Cost sharing or matching" means the value of the third
party in-kind contributions and the portion of the costs of a
federally assisted project or program not borne by the Federal
"Cost-type contract" means a contract in which the
contractor or subcontractor is paid on the basis of the costs it
incurs, with or without a fee.
"Equipment" means tangible, nonexpendable, personal property
having a useful life of more than one year and an acquisition
cost of $5,000 or more per unit. A grantee may use its own
definition of equipment provided that such definition would at
least include all equipment defined above.
"Expenditure report" means: (1) For nonconstruction grants,
the SF-269 "Financial Status Report" (or other equivalent
report); (2) for construction grants, the SF-271 "Outlay Report
and Request for Reimbursement" (or other equivalent report).
"Federally recognized Indian tribal government" means the
governing body or a governmental agency of any Indian tribe,
band, nation, or other organized group or community (including
any Native village as defined in section 3 of the Alaska Native
Claims Settlement Act, 85 Stat 688) certified by the Secretary of
the Interior as eligible for the special programs and services
provided by him through the Bureau of Indian Affairs.
"Government" means a State or local government or a
federally recognized Indian tribal government.
"Grant" means an award of financial assistance, including
cooperative agreements, in the form of money, or property in lieu
of money, by the Federal Government to an eligible grantee. The
term does not include technical assistance which provides
services instead of money, or other assistance in the form of
revenue sharing, loans, loan guarantees, interest subsidies,
insurance, or direct appropriations. Also, the term does not
include assistance such as a fellowship or other lump sum award,
for which the grantee is not required to account on an actual
"Grantee" means the government to which a grant is awarded
and which is accountable for the use of the funds provided. The
grantee is the entire legal entity even if only a particular
component of the entity is designated in the grant award
"Local government" means a county, municipality, city, town,
township, local public authority (including any public and Indian
housing agency under the United States Housing Act of 1937),
school district, special district, intrastate district, council
of governments (whether or not incorporated as a nonprofit
corporation under State law), any other regional or interstate
government entity, or any agency or instrumentality of a local
"Obligations" means the amounts of orders placed, contracts
and subgrants awarded, goods and services received, and similar
transactions during a given period that will require payment by
the grantee during the same or a future period.
"OMB" means the United States Office of Management and
"Outlays" (expenditures) mean charges made to the project or
program. They may be reported on a cash or accrual basis. For
reports prepared on a cash basis, outlays are the sum of actual
cash disbursements for direct charges for goods and services, the
amount of indirect expense incurred, the value of in-kind
contributions applied, and the amount of cash advances and
payments made to contractors and subgrantees. For reports
prepared on an accrued expenditure basis, outlays are the sum of
actual cash disbursements, the amount of indirect expense
incurred, the value of in-kind contributions applied, and the new
increase (or decrease) in the amounts owed by the grantee for the
goods and other property received, for services performed by
employees, contractors, subgrantees, subcontractors, and other
payees, and other amounts becoming owed under programs for which
no current services or performance are required, such as
annuities, insurance claims, and other benefit payments.
"Percentage of completion method" refers to a system under
which payments are made for construction work according to the
percentage of completion of the work, rather than to the
grantee's cost incurred.
"Prior approval" means documentation evidencing consent
prior to incurring specific cost.
"Real property" means land, including land improvements,
structures and appurtenances thereto, excluding movable machinery
"Share", when referring to the awarding agency's portion of
real property, equipment or supplies, means the same percentage
as the awarding agency's portion of the acquiring party's total
costa under the grant to which the acquisition costs under the
grant to which the acquisition cost of the property was charged.
Only costs are to be counted--not the value of third-party in-kind contributions.
"State" means any of the several States of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, any territory or possession of the United States, or any
agency or instrumentality of a State exclusive of local
government. The term does not include any public and Indian
housing agency under United States Housing Act of 1937.
"Subgrant" means an award of financial assistance in the
form of money, or property in lieu of money, made under a grant
by a grantee to an eligible subgrantee. The term includes
financial assistance when provided by contractual legal
agreement, but does not include procurement purchases, nor does
it include any form of assistance which is excluded from the
definition of "grant" in this part.
"Subgrantee" means the government or other legal entity to
which a subgrant is awarded and which is accountable to the
grantee for the use of the funds provided.
"Supplies" means all tangible personal property other than
"equipment" as defined in this part.
"Suspension" means depending on the context, either (1)
temporary withdrawal of the authority to obligate grant funds
pending corrective action by the grantee or subgrantee or a
decision to terminate the grant, or (2) an action taken by a
suspending official in accordance with agency regulations
implementing E.O. 12549 to immediately exclude a person from
participating in transactions for a period, pending completion of
an investigation and such legal or debarment proceedings as may
"Termination" means permanent withdrawal of the authority to
obligate previously-awarded grant funds before that authority
would otherwise expire. It also means the voluntary
relinquishment of that authority by the grantee or subgrantee.
"Termination" does not include: (1) Withdrawal of funds awarded
on the basis of the grantee's underestimate of the unobligated
balance in a prior period; (2) Withdrawal of the unobligated
balance as of the expiration of a grant; (3) Refusal to extend a
grant or award additional funds, to make a competing or
noncompeting continuation, renewal, extension, or supplemental
award; or (4) Voiding of a grant upon determination that the
award was obtained fraudulently, or was otherwise illegal or
invalid from its inception; or
"Terms of a grant or subgrant" means all requirements of the
grant or subgrant, whether in statute, regulations, or the award
"Third party in-kind contributions" means property or
services which benefit a federally assisted project or program
and which are contributed by non-Federal third parties without
charge to the grantee, or a cost-type contractor under the grant
"Unliquidated obligations" for reports prepared on a cash
basis means the amount of obligations incurred by the grantee
that has not been paid. For reports prepared on an accrued
expenditure basis, they represent the amount of obligations
incurred by the grantee for which an outlay has not been
"Unobligated balance" means the portion of the funds
authorized by the Federal agency that has not been obligated by
the grantee and is determined by deducting the cumulative
obligations from the cumulative funds authorized.
(a) General. Subparts A-D of this part apply to all grants
and subgrants to governments, except where inconsistent with
Federal statutes or with regulations authorized in accordance
with the exception provision of 97.5, or:
(1) Grants and subgrants to State and local institutions of
higher educations or State and local hospitals.
(2) The block grants authorized by the Omnibus Budget
Reconciliation Act of 1981 (Community Services; Preventive Health
and Health Services; Alcohol, Drug Abuse, and Mental Health
Services; Maternal and Child Health Services; Social Services;
Low-Income Home Energy Assistance; States' Program of Community
Development Block Grants for Small Cities; and Elementary and
Secondary Education other than programs administered by the
Secretary of Education under Title V, Subtitle D, Chapter 2,
Section 583--the Secretary's discretionary grant program) and
Titles I-III of the Job Training Partnership Act of 1982 and
under the Public Health Services Act (Section 1921), Alcohol and
Drug Abuse Treatment and Rehabilitation Block Grant and Part C of
Title V, Mental Health Service for the Homeless Block Grant).
(3) Entitlement grants to carry out the following programs
of the Social Security Act:
(i) Aid to Needy Families with Dependent Children (Title
IV-A of the Act, not including the Work Incentive Program (WIN)
authorized by section 402(a)19(G); HHS grants for WIN are subject
to this part);
(ii) Child Support Enforcement and Establishment of
Paternity (Title IV-D of the Act);
(iii) Foster Care and Adoption Assistance (Title IV-E of the
(iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV,
and XVI-AABD of the Act); and
(v) Medical Assistance (Medicaid) (Title XIX of the Act) not
including the State Medicaid Fraud Control program authorized by
(4) Entitlement grants under the following programs of The
National School Lunch Act:
(i) School Lunch (section 4 of the Act),
(ii) Commodity Assistance (section 6 of the Act),
(iii) Special Meal Assistance (section 11 of the Act),
(iv) Summer Food Service for Children (section 13 of the
(v) Child Care Food Program (section 17 of the Act).
(5) Entitlement grants under the following programs of The
Child Nutrition Act of 1966:
(i) Special Milk (section 3 of the Act), and
(ii) School Breakfast (section 4 of the Act),
(6) Entitlement grants for State Administrative expenses
under The Food Stamp Act of 1977 (section 16 of the Act).
(7) A grant for and experimental, pilot, or demonstration
project that is also supported by a grant listed in paragraph
(a)(3) of this section;
(8) Grant funds awarded under subsection 412(e) of the
Immigration and Nationality Act [8 U.S.C. 1522(e)] and subsection
501(a) of the Refugee Education Assistance Act of 1980 (Pub. L.
96-422, 94 Stat. 1809), for cash assistance, medical assistance,
and supplemental security income benefits to refugees and
entrants and the administrative costs of providing the assistance
(9) Grants to local education agencies under 20 U.S.C. 236
through 241-1(a), and 242 through 244 (portions of the Impact Aid
program), except for 20 U.S.C. 238(d)(2)(c) and 240(f)
(Entitlement Increase for Handicapped Children); and
(10) Payments under the Veterans Administration's State Home
Per Diem Program (38 U.S.C. 641(a)).
(b) Entitlement programs. Entitlement programs enumerated
above in 97.4(a) (3)-(8) are subject to Subpart E.
97.5 Effect on other issuances.
All other grants administration provisions of codified
program regulations, program manuals, handbooks and other
nonregulatory materials which are inconsistent with this part are
superseded, except to the extent they are required by statute, or
authorized in accordance with the exception provision in 97.5.
97.6 Additions and exceptions.
(a) For classes of grants and grantees subject to this part,
Federal agencies may not impose additional administrative
requirements except in codified regulations published in the
(b) Exceptions for classes of grants or grantees may be
authorized only by OMB.
(c) Exceptions on a case-by-case basis and for subgrantees
may be authorized by the affected Federal agencies.
Subpart B--Pre-Award Requirements
97.10 Forms for applying for grants.
(a) Scope. (1) This section prescribes forms and
instructions to be used by governmental organizations (except
hospitals and institutions of higher education operated by a
government) in applying for grants. This section is not
applicable, however, to formula do not require applicants to
apply for funds on a project basis.
(2) This section applies only to applications to Federal
agencies for grants, and is not required to be applied by
grantees in dealing with applicants for subgrants. However,
grantees are encouraged to avoid more detailed or burdensome
application requirements for subgrants.
(b) Authorized forms and instructions for governmental
organizations. (1) In applying for grants, applicants shall only
use standard application forms or those prescribed by (agency)
with the approval of OMB under the Paperwork Reduction Act of
(2) Applicants are not required to submit more than the
original and two copies of preapplications or applications.
(3) Applicants must follow all applicable instructions that
bear OMB clearance numbers. Federal agencies may specify and
describe the programs, functions, or activities that will be used
to plan, budget, and evaluate the work under a grant. Other
supplementary instructions may be issued only with the approval
of OMB to the extent required under the Paperwork Reduction Act
of 1980. For any standard form, except the SF-424 face sheet,
Federal agencies may shade out or instruct the applicant to
disregard any line item that is not needed.
(4) When a grantee applies for additional funding (such as a
continuation or supplemental award) or amends a previously
submitted application, only the affected pages need be submitted.
Previously submitted pages with information that is still current
need not be resubmitted.
97.11 State plans.
(a) Scope. The statutes for some programs require States to
submit plans before receiving grants. Under regulations
implementing Executive Order 12372, "Intergovernmental Review of
Federal Programs," States are allowed to simplify, consolidate
and substitute plans. This section contains additional
provisions for plans that are subject to regulations implementing
the Executive Order.
(b) Requirements. A State need meet only Federal
administrative or programmatic requirements for a plan that are
in statutes or codified regulations.
(c) Assurances. In each plan the State will include an
assurance that the State will comply with all applicable Federal
statutes and regulations in effect with respect to the periods
for which it receives grant funding. For this assurance and
other assurances required in the plan, the State may:
(1) Cite by number the statutory or regulatory provisions
requiring the assurances and affirm that it gives the assurances
required by those provisions,
(2) Repeat the assurance language in the statutes or
(3) Develop its own language to the extent permitted by law.
(d) Amendments. A State will amend a plan whenever necessary
(1) New or revised Federal statutes or regulations, or
(2) A material change in any State law, organization,
policy, or State agency operation. The State will obtain
approval for the amendment and its effective date but need submit
for approval only the amended portions of the plan.
97.12 Special grant or subgrant conditions for "high-risk"
(a) A grantee or subgrantee may be considered "high-risk" if
an awarding agency determines that a grantee or subgrantee:
(1) Has a history of unsatisfactory performance, or
(2) Is not financially stable, or
(3) Has a management system which does not meet the
management standards set forth in this part, or
(4) Has not conformed to terms and conditions of previous
(5) Is otherwise not responsible; and if the awarding agency
determines that an award will be made special conditions and/or
restrictions shall correspond to the "high-risk" condition shall
be included in the award.
(b) Special conditions or restrictions may include:
(1) Payment on a reimbursement basis,
(2) Withholding authority to proceed to the next phase until
receipt of evidence of acceptable performance within a given
(3) Requiring additional, more
detailed financial reports;
(4) Additional project monitoring,
(5) Requiring the grantee or subgrantee to obtain technical
or management assistance, or
(6) Establishing additional prior approvals.
(c) If an awarding agency decides to impose such conditions,
the awarding official will notify the grantee or subgrantee as
early as possible, in writing, of:
(1) The nature of the special conditions/restrictions,
(2) The reason(s) for imposing them,
(3) The corrective actions which must be taken before they
will be removed and the time allowed for completing the
corrective actions, and
(4) The method of requesting reconsideration of the
Subpart C--Post-Award Requirements
97.20 Standards for financial management systems.
(a) A State must expand and account for grant funds in
accordance with State laws and procedures for expending and
accounting for its own funds. Fiscal control and accounting
procedures of the State, as well as its subgrantees and cost-type
contractors, must be sufficient to--
(1) Permit preparation of reports required by this part and
the statutes authorizing the grant, and
(2) Permit the tracing of funds to a level of expenditures
adequate to establish that such funds have not been used in
violation of the restrictions and prohibitions of applicable
(b) The financial management systems of other grantees and
subgrantees must meet the following standards:
(1) Financial reporting. Accurate, current, and complete
disclosure of the financial results of financially assisted
activities must be made in accordance with the financial
reporting requirements of the grant or subgrant.
(2) Accounting records. Grantees and subgrantees must
maintain records which adequately identify the source and
application of funds provided for financially-assisted
activities. These records must contain information pertaining to
grant or subgrant awards and authorizations, obligations,
unobligated balances, assets, liabilities, outlays or
expenditures, and income.
(3) Internal control. Effective control and accountability
must be maintained for all grant and subgrant cash, real and
personal property, and other assets. Grantees and subgrantees
must adequately safeguard all such property and must assure that
it is used only for authorized purposes.
(4) Budget control. Actual expenditures or outlays must be
compared with budgeted amounts for each grant or subgrant.
Financial information must be related to performance or
productivity data, including the development of unit cost
information whenever appropriate or specifically required in the
grant or subgrant agreement. If unit cost data are required,
estimates based on available documentation will be accepted
(5) Allowable cost. Applicable OMB cost principles, agency
program regulations, and the terms of grant and subgrant
agreements must be followed in determining the reasonableness,
allowability, and allocability of costs.
(6) Source documentation. Accounting records must be
supported by such source documentation as canceled checks, paid
bills, payrolls, time and attendance records contract and
subgrant award documents, etc.
(7) Cash management. Procedures for minimizing the time
elapsing between the transfer of funds from the U.S. Treasury and
disbursement by grantees and subgrantees must be followed
whenever advance payment procedures are used. Grantee must
establish reasonable procedures to ensure the receipt of reports
on grantee's cash balances and cash disbursements in sufficient
time to enable them to prepare complete and accurate cash
transactions reports to the awarding agency. When advances are
made by letter-of-credit or electronic transfer of funds methods,
the grantee must make drawdowns as close as possible to the time
of making disbursement. Grantees must monitor cash drawdowns by
their subgrantees to assure that they conform substantially to
the same standards of timing and amount as apply to advances to
(c) An awarding agency may review the adequacy of the
financial management system of any applicant for financial
assistance as part of a preaward review or at any time subsequent
(a) Scope. This section prescribes the basic standards and
the methods under which the Federal agency makes payments to
grantees, and grantees will make payments to subgrantees and
(b) Basic standard. Methods and procedures for payment must
minimize the time elapsing between the transfer of funds and
disbursement by the grantee or subgrantee, in accordance with
Treasury regulations at 31 CFR Part 205.
(c) Advances. (1) Grantees and subgrantees shall be paid in
advance, provided they maintain or demonstrate the willingness
and ability to maintain procedures to minimize the time elapsing
between the transfer of the funds and their disbursement by the
grantee or subgrantee
(d) Reimbursement. Reimbursement shall be the preferred
method when the requirements in paragraph (c) of this section are
not met. Grantees and subgrantees may also be paid by
reimbursement for any construction grant. Except as otherwise
specified in regulation, Federal agencies shall not use the
percentage of completion method to pay construction grants. The
grantee or subgrantee may use that method to pay its construction
contractor, and if it does, the awarding agency's payments to the
grantee or subgrantee must be based on the grantee's or
subgrantee's actual rate of disbursements.
(e) Working capital advances. If a grantee or subgrantee
cannot meet the criteria for advance payments described in
paragraph (c) of this section, and the awarding agency has
determined that reimbursement is not feasible because the grantee
or subgrantee lacks sufficient working capital, the awarding
agency may provide cash on a working capital advance basis.
Under this procedure the awarding agency shall advance cash to
the grantee or subgrantee to cover its estimated disbursement
needs for an initial period generally geared to the grantee's
disbursing cycle. Thereafter, the awarding agency shall
reimburse the grantee or subgrantee for its actual cash
disbursements. The working capital advance method of payment
must not be used by grantees or subgrantees if the reason for
using such method is the unwillingness or inability of the
grantee to provide timely advances to the subgrantee to meet the
subgrantee's actual cash disbursements.
(f) Effect of program income, refunds, and audit recoveries
on payment. (1) Grantees and subgrantees shall disburse
repayments to and interest earned on a revolving fund before
requesting additional cash payments for the same activity.
(2) Except as provided in paragraph (f)(1) of this section,
grantees and subgrantees shall disburse program income, rebates,
refunds, contract settlements, audit recoveries and interest
earned on such funds before requesting additional cash payments.
(g) Withholding payments. (1) Unless otherwise required by
Federal statute, awarding agencies shall not withhold payments
for proper charges incurred by grantees or subgrantees unless:
(i) The grantee or subgrantee has failed to comply with
grant award conditions or
(ii) The grantee or subgrantee is indebted to the United
(2) Cash withheld for failure to comply with grant award
conditions but without suspension of the grant, must be released
to the grantee upon subsequent compliance. When a grant is
suspended, payment adjustments will be made in accordance with
(3) A Federal agency shall not make payment to a grantee for
amounts that are withheld by the grantee or its subgrantees from
payment to contractors to assure satisfactory completion of work.
Payments shall be made by the Federal agency to a grantee when
the grantee or its subgrantee actually disburses the withheld
funds to the contractors or to escrow accounts established to
assure satisfactory completion of work.
(h) Cash depositories. (1) Consistent with the national
goal of expanding the opportunities for minority business
enterprises, grantees and subgrantees are encouraged to use
minority banks (a bank which is owned at least 50 percent by
minority group members). Additional information may be obtained
from the Minority Business Development Agency, Department of
Commerce, Washington, DC 20230.
(2) A grantee or subgrantee shall maintain a separate bank
account only when required by Federal-State agreement.
(i) Interest earned on advances. Except for interest earned
on advances of funds exempt under the Intergovernmental
Cooperation (31 U.S.C. 6501 et seq.) and the Indian
Self-Determination and Education Assistance Act (25 U.S.C. 450)),
grantees and subgrantees shall promptly, but at least quarterly,
remit interest earned on advances to the Federal agency. The
grantee or subgrantee may keep interest amounts up to $100 per
year for administrative expenses.
97.22 Allowable costs.
(a) Limitation on use of funds. Grant funds must be used
(1) The allowable costs of the grantees, subgrantees, and
cost-type contractors, including allowable costs in the form of
payments to fixed-price contractors; and
(2) Reasonable fees or profits to cost-type contractors but
not any fee or profit (or other increment above allowable costs)
to the grantee or subgrantee.
(b) Applicable cost principles. For each kind of
organization, there is a set of Federal principles for
determining allowable costs. Allowable costs for all grantees
will be determined in accordance with the cost principles
applicable to the organization incurring the costs. The
following chart lists the kinds of organizations and the
applicable cost principles.
For the costs of a State, local or Indian tribal
Use the principles in OMB Circular A-87
For the costs of a Private nonprofit organization
other than an (1) institution
of higher education, (2)
hospital, or (3) organization
named in OMB Circular A-122 as
not subject to that circular:
Use the principles in OMB Circular A-122
For Educational institutions:
Use the principles in OMB Circular A-21
For the costs of a For-profit organization other
than a hospital and an
organization named in OMB
Circular A-122 as not subject
to that circular:
Use the principles in 48 CFR, Part 31: Contract Cost
Principles and Procedures, or
uniform cost accounting
standards that comply with
97.23 Period of availability of funds.
(a) General. Where a funding period is specified, a grantee
may charge to the award only costs resulting from obligations of
the funding period unless carryover of unobligated balances is
permitted, in which case the carryover balances may be charged
for costs resulting from obligations of the subsequent funding
(b) Liquidation of obligations. A grantee must liquidate
all obligations incurred under the award not later than 90 days
after the end of the funding period (or as specified in a program
regulation) to coincide with the submission of the annual
Financial Status Report (SF-269). The Federal agency may extend
this deadline at the request of the grantee.
97.24 Matching or cost sharing.
(a) Basic rule. Costs and contributions acceptable. With
the qualifications and exceptions listed in paragraph (c) of this
section, a matching or cost sharing requirement may be satisfied
by either or both of the following:
(1) Allowable costs incurred by the grantee, subgrantee or a
cost-type contractor under the assistance agreement. This
includes allowable costs borne by non-Federal grants or by other
cash donations from non-Federal third parties.
(2) The value of third party in-kind contributions
applicable to the period to which the cost-sharing or matching
(c) Qualifications and exceptions--(1) Costs borne by other
Federal grant awards. Except as provided by Federal statute, a
cost-sharing or matching requirement may not be met by costs
borne by another Federal grant. This prohibition does not apply
to income earned by a grantee or subgrantee from a contract
awarded under another Federal grant.
(2) General revenue sharing. For the purpose of this
section, general revenue sharing funds distributed under 31
U.S.C. 6702 are not considered Federal grant funds.
(3) Costs or contributions counted towards other Federal
cost-sharing requirements. Neither costs nor the values of third
party in-kind contributions may count towards satisfying a cost-sharing or matching requirement of a grant agreement if they have
been or will be counted towards satisfying a cost-sharing or
matching requirement of another Federal grant agreement, a
Federal procurement contract, or any other award of Federal
(4) Costs financed by program income. Costs financed by
program income, as defined in 97.25, shall not count towards
satisfying a cost-sharing or matching requirement unless they are
expressly permitted in the terms of the assistance agreement.
(This use of general program income is described in 97.25(g).
(5) Services or property financed by income earned by
contractors. Contractors under a grant may earn income from the
activities carried out under the contract in addition to the
amounts earned from the party awarding the contract. No costs of
services or property supported by this income may count toward
satisfying a cost-sharing or matching requirement unless other
provisions of the grant award expressly permit this kind of
income to be used to meet the requirement.
(6) Records. Costs and third party in-kind contributions
counting towards satisfying a cost-sharing or matching
requirement must be verifiable from the records of grantees and
subgrantees or cost-type contractors. These records must show
how the value placed on third party in-kind contributions was
derived. To the extent feasible, volunteer services must be
supported by the same methods that the organization uses to
support the allocability of regular personnel costs.
(7) Special standards for third party in-kind contributions.
(i) Third party in-kind contributions count towards satisfying a
cost-sharing or matching requirements only where, if the party
receiving the contributions were to pay for them, the payments
would be allowable costs.
(ii) Some third party in-kind contributions are goods and
services that, if the grantee, subgrantee, or contractor
receiving the contribution had to pay for them, the payments
would have been an indirect costs. Costs sharing or matching
credit for such contributions shall be given only if the grantee,
subgrantee or contractor has established, along with its regular
indirect cost rate, a special rate for allocating to individual
projects or programs the value of the contributions.
(iii) A third party in-kind contribution to a fixed-price
contract may count towards satisfying a cost-sharing or matching
requirement only if it results in:
(A) An increase in the services or property provided under
the contract (without additional cost to the grantee or
(B) A cost savings to the grantee or subgrantee.
(iv) The values placed on third party in-kind contributions
for cost-sharing or matching purposes must conform to the rules
in the succeeding sections of this part. If a third party
in-kind contribution is a type not treated in those sections, the
value placed upon it shall be fair and reasonable.
(d) Valuation of donated services.
(1) Volunteer services. Unpaid services provided to a
grantee or subgrantee by individuals must be valued at rates
consistent with those ordinarily paid for similar work in the
grantee's or subgrantee's organization. If the grantee or
subgrantee does not have employees performing similar work, the
rates will be consistent with those ordinarily paid by other
employers for similar work in the same labor market. In either
case, a reasonable amount for fringe benefits may be included in
(2) Employees of other organizations. When an employer
other than a grantee, subgrantee or cost-type contractor
furnishes free of charge the services of an employee in the
employee's normal line of work, the services will be valued at
the employee's regular rate of pay exclusive of the employee's
fringe benefits and overhead cost. If the services are in a
different line of work, paragraph (d)(1) of this section applies.
(e) Valuation of third party donated supplies and loaned
equipment or space.
(1) If a third party donates supplies, the contribution must
be valued at the market value of the supplies at the time of
(2) If a third party donates the use of equipment or space
in a building but retains title, the contribution must be valued
at the fair rental rate of the equipment or space.
(f) Valuation of third party donated equipment, buildings,
and land. If a third party donates equipment, buildings, or
land, and title passes to a grantee or subgrantee, the treatment
of the donated property depends upon the purpose of the grant or
subgrant, as follows:
(1) Awards for capital expenditures. If the purpose of the
grant or subgrant is to assist the grantee or subgrantee in the
acquisition of property, the market value of that property at the
time of donation may be counted as cost-sharing or matching;
(2) Other awards. If assisting in the acquisition of
property is not the purpose of the grant or subgrant, paragraphs
(f)(2)(i) and (ii) of this section apply:
(i) If approval is obtained from the awarding agency, the
market value at the time of donation of the donated equipment or
buildings and the fair rental rate of the donated land may be
counted as cost-sharing or matching. In the case of a subgrant,
the terms of the grant agreement may require that the approval be
obtained from the Federal agency as well as the grantee. In all
cases, the approval may be given only if a purchase of the
equipment or rental of the land would be approved as an allowable
direct cost. If any part of the donated property was acquired
with Federal funds, only the non-federal share of the property
may be counted as cost-sharing or matching;
(ii) If approval is not obtained under paragraph (f)(2)(i)
of this section, no amount may be counted for donated land, and
only depreciation or use allowances may be counted for donated
equipment and buildings. The depreciation or use allowances for
this property are not treated as third party in-kind
contributions. Instead, they are treated as costs incurred by
the grantee or subgrantee. They are computed and allocated
(usually as indirect costs) in accordance with the cost
principles specified in 97.22 in the same way as depreciation or
use allowances for purchased equipment and buildings. The amount
of depreciation or use allowances for donated equipment and
buildings is based on the property's market value at the time it
(g) Valuation of grantee or subgrantee donated real property
for construction/acquisition. If a grantee or subgrantee donates
real property for a construction or facilities acquisition
project, the current market value of that property may be counted
as cost-sharing or matching. If any part of the donated property
was acquired with Federal funds, only the non-federal share of
the property may be counted as cost-sharing or matching.
(h) Appraisal of real property. In some cases under
paragraphs (e), (f) and (g) of this section, it will be necessary
to establish the market value of land or a building or the fair
rental rate of land or of space in a building. In these cases,
the Federal agency may require the market value or fair rental
value be set by an independent appraiser, and that the value or
rate be certified by the grantee. This requirement will also be
imposed by the grantee on subgrantees.
97.25 Program Income.
(a) General. Grantees are encouraged to earn income to
defray program costs. Program income includes income from fees
for services performed, from the use or rental of real or
personal property acquired with grant funds, from the sale of
commodities or items fabricated under a grant agreement, and from
payments of principal and interest on loans made with grant
funds. Except as otherwise provided in regulations of the
Federal agency, program income does not include interest on grant
funds, rebates, credits, discounts, refunds, etc. and interest
earned on any of them.
(b) Definition of program income. Program income means
gross income received by the grantee or subgrantee directly
generated by a grant supported activity, or earned only as a
result of the grant agreement during the grant period. "During
the grant period" is the time between the effective date of the
award and the ending date of the award reflected in the final
(c) Cost of generating program income. If authorized by
Federal regulations or the grant agreement, costs incident to the
generation of program income may be deducted from gross income to
determine program income.
(d) Governmental revenues. Taxes, special assessments,
levies, fines, and other such revenues raised by a grantee or
subgrantee are not program income unless the revenues are
specifically identified in the grant agreement or Federal agency
regulations as program income.
(e) Royalties. Income from royalties and license fees for
copyrighted material, patents, and inventions developed by a
grantee or subgrantee is program income only if the revenues are
specifically identified in the grant award or Federal agency
regulations as program income. (See §97.34.)
(f) Property. Proceeds from the sale of real property or
equipment will be handled in accordance with the requirements of
§§ 97.31 and 97.32.
(g) Use of program income. Program income shall be deducted
from outlays which may be both Federal and non-Federal as
described below, unless the Federal agency regulations or the
grant agreement specify another alternative (or a combination of
the alternatives). In specifying alternatives, the Federal
agency may distinguish between income earned by grantees and
income earned by subgrantees and between the sources, kinds, or
amounts of income. When the Federal agency authorizes the
alternatives in paragraphs (g)(2) and (3) of this section,
program income in excess of any limits stipulated shall also be
deducted from outlays.
(1) Deduction. Ordinarily program income shall be deducted
from total allowable costs to determine the net allowable costs.
Program income shall be used for current costs unless the Federal
agency authorizes otherwise. Program income which the grantee
did not anticipate at the time of the award shall be used to
reduce the Federal agency and grantee contributions rather than
to increase the funds committed to the project.
(2) Addition. When authorized, program income may be added
to the funds committed to the grant agreement by the Federal
agency and the grantee. The program income must be used for the
purposes and under the conditions of the grant agreement.
(3) Cost sharing or matching. When authorized, program
income may be used to meet the cost-sharing or matching
requirement of the grant agreement. The amount of the Federal
grant award remains the same.
(h) Income after the award period. There are no Federal
requirements governing the disposition of income earned after the
end of the award period (i.e., until the ending date of the final
financial report, see paragraph (a) of this section), unless the
terms of the agreement or the Federal agency regulations provide
97.26 Non-Federal audits.
(a) Basic Rule. Grantees and subgrantees are responsible
for obtaining audits in accordance with the Single Audit Act of
1984 (31 U.S.C. 7501-7) and the Federal agency implementing
regulations. The audits shall be made by an independent auditor
in accordance with generally accepted government auditing
standards covering financial and compliance audits.
(b) Subgrantees. State or local governments, as those terms
are defined for purposes of the Single Audit Act, that receive
Federal financial assistance and provide $25,000 or more of it in
a fiscal year to a subgrantee shall:
(1) Determine whether State or local subgrantees have met
the audit requirements of the Act and whether subgrantees covered
by OMB Circular A-110, "Uniform Requirements for Grants and Other
Agreements with Institutions of Higher Education, Hospitals and
Other Nonprofit Organizations" have met the audit requirement.
Commercial contractors (private for profit and private and
governmental organizations) providing goods and services to State
and local governments are not required to have a single audit
performed. State and local governments should use their own
procedures to ensure that the contractor has complied with laws
and regulations affecting the expenditure of Federal funds;
(2) Determine whether the subgrantee spent Federal
assistance funds provided in accordance with applicable laws and
regulations. This may be accomplished by reviewing an audit of
the subgrantee made in accordance with the Act, Circular A-110,
or through other means (e.g., program reviews) if the subgrantee
has not had such an audit;
(3) Ensure that appropriate corrective action is taken
within six months after receipt of the audit report in instance
of noncompliance with Federal laws and regulations;
(4) Consider whether Subgrantee audits necessitate
adjustment of the grantee's own records; and
(5) Require each subgrantee to permit independent auditors
to have access to the records and financial statements.
(c) Auditor selection. In arranging for audit services,
§97.36 shall be followed.
CHANGES, PROPERTY, AND SUBAWARDS
(a) General. Grantees and subgrantees are permitted to
rebudget within the approved direct cost budget to meet
unanticipated requirements and may make limited program changes
to the approved project. However, unless waived by the awarding
agency, certain types of post-award changes in budgets and
projects shall require the prior written approval of the awarding
(b) Relation of cost principles. The applicable cost
principles (see Section §97.22) contain requirements for prior
approval of certain types of costs. Except where waived, those
requirements apply to all grants and subgrants even if paragraphs
(c) through (f) of this section do not.
(c) Budget changes. (1) Nonconstruction projects. Except as
stated in program regulations or an award document, grantees or
subgrantees shall obtain the prior approval of the awarding
agency whenever any of the following changes is anticipated under
a nonconstruction award:
(i) Any revision which would result in the need for
(ii) Unless waived by the awarding agency, cumulative
Transfers among direct cost categories, or, if applicable, among
separately budgeted programs, projects, functions, or activities
which exceed or are expected to exceed ten percent of the current
total approved budget, whenever the awarding agency's share
(iii) Transfer of funds allotted for training allowances
(i.e., from direct payments to trainees to other expense
(2) Construction projects. Grantees and subgrantees shall
obtain prior written approval for any budget revision which would
result in the need for additional funds.
(3) Combined construction and nonconstruction projects.
When a grant or subgrant provides funding for both construction
and nonconstruction activities, the grantee or subgrantee must
obtain prior written approval from the awarding agency before
making any fund or budget transfer from nonconstruction to
construction or vice versa.
(d) Programmatic changes. Grantees or subgrantees must
obtain the prior approval of the awarding agency whenever any of
the following actions is anticipated:
(1) Any revision of the scope or objectives of the project
(regardless of whether there is an associated budget revision
requiring prior approval);
(2) Need to extend the period of availability of funds;
(3) Changes in key persons specified in the application or
grant award. In research projects, a change in the project
director or principal investigator shall always require approval
unless waived by the awarding agency.
(4) Under nonconstruction projects, contracting out,
subgranting (if authorized by law) or otherwise obtaining the
services of a third party to perform activities which are central
to the purposes of the award. This approval requirement is in
addition to the approval requirements of §97.36 but does not
apply to the procurement of equipment, supplies, and general
(e) Additional prior approval requirements. The awarding
agency may not require prior approval for any budget revision
which is not described in paragraph (c) of this section.
(f) Requesting prior approval. (1) A request for prior
approval of a budget revision will be in the same budget format
the grantee used in its application and shall be accompanied by a
narrative justification for the proposed revision.
(2) A request for a prior approval under the applicable
Federal cost principles (see Section §97.22) may be made by
(3) A request by a subgrantee for prior approval will be
addressed in writing to the grantee. The grantee will promptly
review such request and shall approve or disapprove the request
in writing. A grantee will not approve any budget or project
revision which is inconsistent with the purpose or terms and
conditions of the Federal grant to the grantee. If the revision
requested by the subgrantee would result in a change to the
grantee's approved project which requires Federal prior approval,
the grantee will obtain the Federal agency's approval before
approving the subgrantee's request.
97.31 Real Property.
(a) Title. Subject to the obligations and conditions set
forth in this section, title to real property acquired under a
grant or subgrant vests upon acquisition in the grantee or
(b) Use. Except as otherwise provided by Federal statutes,
real property must be used for the originally authorized purpose
as long as needed for that purpose. The grantee or subgrantee
shall not dispose of or encumber its title or other interests.
(c) Disposition. When real property is no longer needed for
the originally authorized purpose, the grantee or subgrantee will
request disposition instructions from the awarding agency. The
instructions must provide for one of the following alternatives:
(1) Retention of title. Retain title after compensating the
awarding agency. The amount paid to the awarding agency will be
computed by applying the awarding agency's percentage of
participation in the cost of the original purchase to the fair
market value of the property. However, in those situations where
a grantee or subgrantee is disposing of real property acquired
with grant funds and acquiring replacement real property under
the same program, the net proceeds from the disposition may be
used as an offset to the cost of the replacement property.
(2) Sale of property. Sell the property and compensate the
awarding agency. The amount due to the awarding agency will be
calculated by applying the awarding agency's percentage of
participation in the cost of the original purchase to the
proceeds of the sale after the deduction of any actual and
reasonable selling and fixing-up expenses. If the grant is still
active, the net proceeds from sale may be offset against the
original cost of the property. When a grantee or subgrantee is
directed to sell property, sales procedures must be followed that
provide for competition to the extent practicable and result in
the highest possible return.
(3) Transfer of title. Transfer title to the awarding
agency or to a third-party designated/approved by the awarding
agency. The grantee or subgrantee shall be paid an amount
calculated by applying the grantee's or subgrantee's percentage
of participation in the purchase of the real property to the
current fair market value of the property.
(a) Title. Subject to the obligations and conditions set
forth in this section, title to equipment acquired under a grant
or subgrant vests upon acquisition in the grantee or subgrantee
(b) States. A State will use, manage, and dispose of
equipment acquired under a grant by the State in accordance with
State laws and procedures. Other grantees and subgrantees will
follow paragraphs (c) through (e) of this section.
(c) Use. (1) Equipment must be used by the grantee or
subgrantee in the program or project for which it was acquired as
long as needed, whether or not the project or program continues
to be supported by Federal funds. When no longer needed for the
original program or project, the equipment may be used in other
activities currently or previously supported by a Federal agency.
(2) The grantee or subgrantee shall also make equipment
available for use on other projects or programs currently or
previously supported by the Federal Government, providing such
use does not interfere with the work on the projects or programs
for which it was originally acquired. First preference for other
use shall be given to other programs or projects supported by the
awarding agency. User fees should be considered if appropriate.
(3) Notwithstanding the encouragement in §97.25(a) to earn
program income, The grantee or subgrantee must not use equipment
acquired with grant funds to provide services for a fee to
compete unfairly with private companies that provide equivalent
services, unless specifically permitted or contemplated by
(4) When acquiring replacement equipment, the grantee or
subgrantee may use the equipment to be replaced as a trade-in or
sell the equipment and use the proceeds to offset the cost of the
replacement equipment, subject to the approval of the awarding
(d) Management requirements. Procedures for managing
equipment (including replacement equipment), whether acquired in
whole or in part with grant funds, until disposition takes place
must, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a
description of the property, a serial number or other
identification number, the source of property, who holds title,
the acquisition date, and cost of the property, percentage of
Federal participation in the cost of the property, the location,
use and condition of the property, and any ultimate disposition
data including the date of disposal and sale price of the
(2) A physical inventory of the property must be taken and
the results reconciled with the property records at least once
every two years.
(3) A control system must exist to ensure adequate
safeguards to prevent loss, damage, or theft of the property.
Any loss, damage, or theft shall be investigated.
(4) Adequate maintenance procedures must exist to keep the
property in good condition.
(5) If the grantee or subgrantee is authorized or required
to sell the property, proper sales procedures must be established
to ensure the highest possible return.
(e) Disposition. When original or replacement equipment
acquired under a grant or subgrant is no longer needed for the
original project or program or for other activities currently or
previously supported by a Federal agency, disposition of the
equipment must be made as follows:
(1) Items of equipment with a current per-unit fair market
value of less than $5,000 may be retained, sold or otherwise
disposed of with no further obligation to the awarding agency.
(2) Items of equipment with a current per unit fair market
value in excess of $5,000 may be retained or sold and the
awarding agency shall have a right to an amount calculated by
multiplying the current market value or proceeds from the sale by
the awarding agency's share of the equipment.
(3) In cases where a grantee or subgrantee fails to take
appropriate disposition actions, the awarding agency may direct
the grantee or subgrantee to take excess and disposition actions.
(f) Federal equipment. In the event a grantee or subgrantee
is provided federally-owned equipment:
(1) Title remains vested in the Federal Government.
(2) The grantee or subgrantee will manage the equipment in
accordance with Federal agency rules and procedures, and submit
an annual inventory listing.
(3) When the equipment is no longer needed, the grantee or
subgrantee will request disposition instructions from Federal
(g) Right to transfer title. The Federal agency may reserve
the right to transfer title to the Federal Government or a third
party named by the awarding agency when such a third party is
otherwise eligible under existing statutes. Such transfers are
subject to the following standards:
(1) The property must be identified in the grant or
otherwise made known to the grantee in writing;
(2) The Federal agency shall issue disposition instructions
within 120 calendar days after the end of the Federal support of
the project for which it was acquired. If the Federal agency
fails to issue disposition instructions within the 120
calendar-day period the grantee shall follow §97.32(e).
(3) When title to equipment is transferred, the grantee
shall be paid an amount calculated by applying the percentage of
participation in the purchase to the current fair market value of
(a) Title. Title to supplies acquired under a grant or
subgrant will vest, upon acquisition, in the grantee or
(b) Disposition. If there is a residual inventory of unused
supplies exceeding $5,000 in total aggregate fair market value
upon termination or completion of the grant support and if the
supplies are not needed for any other Federally sponsored
programs or projects, the grantee or subgrantee shall compensate
the awarding agency for its share.
97.34 Copyrights, patents and rights in data.
The Federal agency reserves a royalty-free, non-exclusive,
and irrevocable license to reproduce, publish, or otherwise use,
and to authorize others to use, for Federal Government purposes:
(a) The copyright in any work developed under a grant,
subgrant, or contract under a grant or subgrant; and
(b) Any rights of copyright to which a grantee, subgrantee
or a contractor purchases ownership with grant support.
97.35 Subawards to debarred and suspended parties.
Grantees and subgrantees must not make any award or permit
any award (subgrant or contract) at any tier to any party which
is debarred or suspended or is otherwise excluded from or
ineligible for participation in Federal assistance programs under
Executive Order 12549, "Debarment and Suspension."
(a) States. When procuring property and services under a
grant, a State will follow the same policies and procedures it
uses for procurements from its non-Federal funds. The State will
ensure that every purchase order or other contract includes any
clauses required by Federal statutes and executive orders and
their implementing regulations. Other grantees and subgrantees
will follow paragraphs (b) through (i) in this section.
(b) Procurement Standards. (1) Grantees and subgrantees
will use their own procurement procedures which reflect
applicable State and local laws and regulations, provided that
the procurements conform to applicable Federal law and the
standards identified in this section.
(2) Grantees and subgrantees will maintain a contract
administration system which ensures that contractors perform in
accordance with the terms, conditions, and specifications of
their contracts or purchase orders.
(3) Grantees and subgrantees will maintain a written code of
standards of conduct governing the performance of their employees
engaged in the award and administration of contracts. No
employee, officer or agent of the grantee or subgrantee shall
participate in the selection, or in the award or administration
of a contract supported by Federal funds if a conflict of
interest, real or apparent, would be involved. Such a conflict
would arise when:
(i) The employee, officer or agent,
(ii) Any member of his or her immediate family,
(iii) His or her partner, or
(iv) An organization which employs, or is about to employ,
any of the above, has a financial or other interest in the firm
selected for award. The grantee's or subgrantee's officers,
employees or agents will neither solicit nor accept gratuities,
favors or anything of monetary value from contractors, potential
contractors, or parties to subagreements. Grantees and
subgrantees may set minimum rules where the financial interest is
not substantial or the gift is an unsolicited item of nominal
intrinsic value. To the extent permitted by State or local law
or regulations, such standards of conduct will provide for
penalties, sanctions, or other disciplinary actions for
violations of such standards by the grantee's or subgrantee's
officers, employees, or agents, or by contractors or their
agents. The awarding agency may in regulation provide additional
prohibitions relative to real, apparent, or potential conflicts
(4) Grantee and subgrantee procedures must provide for a
review of proposed procurements to avoid purchase of unnecessary
or duplicative items. Consideration should be given to
consolidating or breaking out procurements to obtain a more
economical purchase. Where appropriate, an analysis will be made
of lease versus purchase alternatives and any other appropriate
analysis to determine the most economical approach.
(5) To foster greater economy and efficiency, grantees and
subgrantees are encouraged to enter into State and local
intergovernmental agreements for procurement or use of common
goods and services.
(6) Grantees and subgrantees are encouraged to Use Federal
excess and surplus property in lieu of purchasing new equipment
and property whenever such use is feasible and reduces project
(7) Grantees and subgrantees are encouraged to use value
engineering clauses in contracts for construction projects of
sufficient size to offer reasonable opportunities for cost
reductions. Value engineering is a systematic and creative
analysis of each contract item or task to ensure that its
essential function is provided at the overall lower cost.
(8) Grantees and subgrantees will make awards only to
responsible contractors possessing the ability to perform
successfully under the terms and conditions of a proposed
procurement. Consideration must be given to such matters as
contractor integrity, compliance with public policy, record of
past performance, and financial and technical resources.
(9) Grantees and subgrantees will maintain records
sufficient to detail the significant history of a procurement.
These records must include, but are not necessarily limited to
the following: rationale for the method of procurement,
selection of contract type, contractor selection or rejection,
and the basis for the contract price.
(10) Grantees and subgrantees may use time and material type
(i) After a determination that no other contract is
(ii) If the contract includes a ceiling price that the
contractor exceeds at its own risk.
(11) Grantees and subgrantees alone will be responsible, in
accordance with good administrative practice and sound business
judgment, for the settlement of all contractual and
administrative issues arising out of procurements. These issues
include, but are not limited to, source evaluation, protests,
disputes, and claims. These standards do not relieve the grantee
and subgrantee of any contractual responsibilities under its
contracts. Federal agencies will not substitute their judgment
for that of the grantee or subgrantee unless the matter is
primarily a Federal concern. Violations of law will be referred
to the local, State, or Federal authority having proper
(12) Grantees and subgrantees will have procedures to handle
and resolve protests relating to their procurements and shall in
all instances disclose information regarding the protest to the
awarding agency. A protestor must exhaust all administrative
remedies with the grantee or subgrantee before pursuing a protest
with the Federal agency. Reviews of protests by the Federal
agency will be limited to:
(i) Violations of Federal law or regulations and the
standards of this section (violations of State or local law will
be under the jurisdiction of State or local authorities) and
(ii) Violations of the grantee's or subgrantee's protest
procedures for failure to review a complaint or protest.
Protests received by the Federal agency other than those
specified above will be referred to the grantee or subgrantee.
(c) Competition. (1) All procurement transactions will be
conducted in a manner providing full and open competition
consistent with the standards of §97.36. Some of the situations
considered to be restrictive of competition include but are not
(i) Placing unreasonable requirements on firms in order for
them to qualify to do business;
(ii) Requiring unnecessary experience and excessive bonding;
(iii) Noncompetitive pricing practices between firms or
between affiliated companies;
(iv) Noncompetitive awards to consultants that are on
(v) Organizational conflicts of interest;
(vi) Specifying only a "brand name" product instead of
allowing "an equal" product to be offered and describing the
performance of other relevant requirements of the procurement;
(vii) Any arbitrary action in the procurement process.
(2) Grantees and subgrantees will conduct procurements in a
manner that prohibits the use of statutorily or administratively
imposed in-State or local geographical preferences in the
evaluation of bids or proposals, except in those cases where
applicable Federal statutes expressly mandate or encourage
geographic preference. Nothing in this section preempts State
licensing laws. When contracting for architectural and
engineering (A/E) services, geographic location may be a
selection criteria, provided its application leaves an
appropriate number of qualified firms, given the nature and size
of the project, to compete for the contract.
(3) Grantees and subgrantees will have written selection
procedures for procurement transactions. These procedures must
ensure that all solicitations:
(i) Incorporate a clear and accurate description of the
technical requirements for the material, product, or service to
be procured. Such description shall not, in competitive
procurements, contain features which unduly restrict competition.
The description may include a statement of the qualitative nature
of the material, product or service to be procured, and when
necessary, shall set forth those minimum essential
characteristics and standards to which it must conform if it is
to satisfy its intended use. Detailed product specifications
should be avoided if at all possible. When it is impractical or
uneconomical to make a clear and accurate description of the
technical requirements, a "brand name or equal" description may
be used as a means to define the performance or other salient
requirements of a procurement. The specific features of the
named brand that must be met by offerors shall be clearly stated;
(ii) Identify all requirements that the offerors must
fulfill and all other factors to be used in evaluating bids or
(4) Grantees and subgrantees will ensure that all
prequalified lists of persons, firms, or products which are used
in acquiring goods and services are current and include enough
qualified sources to ensure maximum open and free competition.
Also, grantees and subgrantees will not preclude potential
bidders from qualifying during the solicitation period.
(d) Methods of procurement to be followed. (1) Procurement
by small purchase procedures. Small purchase procedures are
those relatively simple and informal procurement methods for
securing services, supplies, or other property that do not cost
more than $25,000 in the aggregate. If small purchase
procurements are used, price or rate quotations will be obtained
from an adequate number of qualified sources.
(2) Procurement by sealed bids (formal advertising). Bids
are publicly solicited and a firm-fixed-price contract (lump sum
or unit price) is awarded to the responsible bidder whose bid
conforms with all the material terms and conditions of the
invitation for bids, is the lowest in price. The sealed bid
method is the preferred method for procuring construction, if the
conditions in §97.36(d)(2)(i) apply.
(i) In order for sealed bidding to be feasible, the
following conditions should be present:
(A) A complete, adequate, and realistic specification or
purchase description is available;
(B) Two or more responsible bidders are willing and able to
compete effectively for the business; and
(C) The procurement lends itself to a firm fixed price
contract and the selection of the successful bidder can be made
principally on the basis of price.
(ii) If sealed bids are used, the following requirements
(A) The invitation for bids will be publicly advertised and
bids shall be solicited from an adequate number of known
suppliers, providing them sufficient time prior to the date set
for opening the bids;
(B) The invitation for bids, which must include any
specifications and pertinent attachments, shall define the items
or services in order for the bidder to properly respond;
(C) All bids will be publicly opened at the time and place
prescribed in the invitation for bids;
(D) A firm fixed-price contract award will be made in
writing to the lowest responsive and responsible bidder. Where
specified in bidding documents, factors such as discounts,
transportation cost, and life cycle costs shall be considered in
determining which bid is lowest. Payment discounts will only be
used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound
(3) Procurement by competitive proposals. The technique of
competitive proposals is normally conducted with more than one
source submitting an offer, and either a fixed-price or
cost-reimbursement type contract is awarded. It is generally
used when conditions are not appropriate for the use of sealed
bids. If this method is used, the following requirements apply:
(i) Requests for proposals will be publicized and identify
all evaluation factors and their relative importance. Any
response to publicized requests for proposals shall be honored to
the maximum extent practical;
(ii) Proposals will be solicited from an adequate number of
(iii) Grantees and subgrantees will have a method for
conducting technical evaluations of the proposals received and
for selecting awardees;
(iv) Awards will be made to the responsible firm whose
proposal is most advantageous to the program, with price and
other factors considered; and
(v) Grantees and subgrantees may use competitive proposal
procedures for qualifications-based procurement of
architectural/engineering (A/E) professional services, whereby
competitors' qualifications are evaluated and the most qualified
competitor is selected, subject to negotiation of fair and
reasonable compensation. The method, where price is not used as
a selection factor, can only be used in procurement of A/E
professional services. It cannot be used to purchase other types
of services although A/E firms are a potential source to perform
the proposed effort.
(4) Procurement by noncompetitive proposals is procurement
through solicitation of a proposal from only one source, or after
solicitation of a number of sources, competition is determined
(i) Procurement by noncompetitive proposal may be used only
when the award of a contract is infeasible under small purchase
procedures, sealed bids or competitive proposals and one of the
following circumstances applies:
(A) The item is available only from a single source;
(B) The public exigency or emergency for the requirement
does not permit a delay resulting from competitive solicitation;
(C) The awarding agency authorizes noncompetitive proposals;
(D) After solicitation of a number of sources, competition
is determined inadequate.
(ii) Cost analysis , i.e., verifying the proposed cost data,
the projections of the data, and the evaluation of the specific
elements of costs and profit, is required.
(iii) Grantees and subgrantees may be required to submit the
proposed procurement to the awarding agency for pre-award review
in accordance with paragraph (g) of this section.
(e) Contracting with small and minority firms, women's
business enterprises and labor surplus area firms. (1) The
grantee and subgrantee will take all necessary affirmative steps
to assure that minority firms, women's business enterprises, and
labor surplus area firms are used when possible.
(2) Affirmative steps shall include:
(i) Placing qualified small and minority businesses and
women's business enterprises on solicitation lists;
(ii) Assuring that small and minority businesses, and
women's business enterprises are solicited whenever they are
(iii) Dividing total requirements, when economically
feasible, into smaller tasks or quantities to permit maximum
participation by small and minority business, and women's
(iv) Establishing delivery schedules, where the requirement
permits, which encourage participation by small and minority
business, and women's business enterprises;
(v) Using the services and assistance of the Small Business
Administration, and the Minority Business Development Agency of
the Department of Commerce as appropriate; and
(vi) Requiring the prime contractor, if subcontracts are to
be let, to take the affirmative steps listed in paragraphs
(e)(2)(i) through (v) of this section.
(f) Contract cost and price. (1) Grantees and subgrantees
must perform a cost or price analysis in connection with every
procurement action including contract modifications. The method
and degree of analysis depends on the facts surrounding the
particular procurement situation, but as a starting point,
grantees must make independent estimates before receiving bids or
proposals. A cost analysis must be performed when the offeror is
required to submit the elements of his estimated cost, e.g.,
under professional, consulting, and architectural-engineering
services contracts. A cost analysis will be necessary when
adequate price competition is lacking, and for sole source
procurements, including contract modifications or change orders,
unless price reasonableness can be established on the basis of a
catalog or market price of a commercial product sold in
substantial quantities to the general public or based on prices
set by law or regulation. A price analysis will be used in all
other instances to determine the reasonableness of the proposed
(2) Grantees and subgrantees will negotiate profit as a
separate element of the price for each contract in which there is
no price competition and in all cases where cost analysis is
performed. To establish a fair and reasonable profit,
consideration will be given to the complexity of the work to be
performed, the risk borne by the contractor, the contractor's
investment, the amount of subcontracting, the quality of its
record of past performance, and industry profit rates in the
surrounding geographical area for similar work.
(3) Costs or prices based on estimated costs for contracts
under grants will be allowable only to the extent that costs
incurred or cost estimates included in negotiated prices are
consistent with Federal cost principles (see §97.22). Grantees
may reference their own cost principles that comply with the
applicable Federal cost principles.
(4) The cost plus a percentage of cost and percentage of
construction cost methods of contracting shall not be used.
(g) Awarding agency review. (1) Grantees and subgrantees
must make available, upon request from the awarding agency,
technical specifications on proposed procurements where the
awarding agency believes such review is needed to ensure that the
item or service specified is the one being proposed for purchase.
This review generally will take place prior to the time the
specification is incorporated into a solicitation document.
However, if the grantee or subgrantee desires to have the review
accomplished after a solicitation has been developed, the
awarding agency may still review the specifications, with such
review usually limited to the technical aspects of the proposed
(2) Grantees and subgrantees must on request make available
for awarding agency pre-award review procurement documents, such
as requests for proposals or invitations for bids, independent
cost estimates, etc., when:
(i) A grantee's or subgrantee's procurement procedures or
operation fails to comply with the procurement standards in this
(ii) The procurement is expected to exceed $25,000 and is to
be awarded without competition, or only one bid or offer is
received in response to a solicitation; or
(iii) The procurement, which is expected to exceed $25,000,
specifies a "brand name" product; or
(iv) The proposed award, over $25,000 is to be awarded to
other than the apparent low bidder under a sealed bid
(v) A proposed contract modification changes the scope of a
contract or increases the contract amount by more than $25,000.
(3) A grantee or subgrantee will be exempt from the
pre-award review in paragraph (g)(2) of this section if the
awarding agency determines that its procurement systems comply
with the standards of this section.
(i) A grantee or subgrantee may request that its procurement
system be reviewed by the awarding agency to determine whether
its system meets these standards in order for its system to be
certified. Generally, these reviews shall occur where there is a
continuous high-dollar funding, and procurement contracts are
awarded on a regular basis;
(ii) A grantee or subgrantee may self-certify its
procurement system. Such self-certification shall not limit the
awarding agency's right to survey the system. Under a
self-certification procedure, awarding agencies may wish to rely
on written assurances from the grantee or subgrantee that it is
complying with these the standards. A grantee or subgrantee will
cite specific procedures, regulations, standards, etc., as being
in compliance with these requirements and have its system
available for review.
(h) Bonding requirements. For construction or facility
improvement contracts or subcontracts exceeding $100,000, the
awarding agency may accept the bonding policy and requirements of
the grantee or subgrantee, provided the awarding agency has made
a determination that the awarding agency's interest is adequately
protected. If such a determination has not been made, the
minimum requirements shall be as follows:
(1) A bid guarantee from each bidder equivalent to five
percent of the bid price. The "bid guarantee" shall consist of a
firm commitment such as a bid bond, certified check, or other
negotiable instrument accompanying a bid as assurance that the
bidder will, upon acceptance of his bid, execute such contractual
documents as may be required within the time specified.
(2) A performance bond on the part of the contractor for 100
percent of the contract price. A "performance bond" is one
executed in connection with a contract to secure fulfillment of
all the contractor's obligations under such contract.
(3) A payment bond on the part of the contractor for 100
percent of the contract price. A "payment bond" is one executed
in connection with a contract to assure payment as required by
law of all persons supplying labor and material in the execution
of the work provided for in the contract.
(i) Contract provisions. A grantee's and subgrantee's
contracts must contain provisions in paragraph (i) of this
section. Federal agencies are permitted to require changes,
remedies, changed conditions, access and records retention,
suspension of work, and other clauses approved by the Office of
(1) Administrative, contractual, or legal remedies in
instances where contractors violate or breach contract terms, and
provide for such sanctions and penalties as may be appropriate.
(Contracts other than small purchases);
(2) Termination for cause and for convenience by the grantee
or subgrantee, including the manner by which it will be effected
and the basis for settlement. (All contracts in excess of
(3) Compliance with Executive Order 11246 of September 24,
1965 entitled "Equal Employment Opportunity," as amended by
Executive Order 11375 of October 13, 1967 and as supplemented in
Department of Labor regulations (41 CFR Part 60). (All
construction contracts awarded in excess of $10,000 by grantees
and their contractors or subgrantees)
(4) Compliance with the Copeland "Anti-Kickback" Act (18
U.S.C. 874) as supplemented in Department of Labor regulations
(29 CFR Part 3). (All contracts and subgrants for construction
(5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to
a-7) as supplemented in Department of Labor regulations (29 CFR
Part 5). (Construction contracts in excess of $2,000 awarded by
grantees or subgrantees when required by Federal grant program
(6) Compliance with Sections 103 and 107 of the Contract
Work Hours and Safety Standards Act (40 U.S.C. 327-330) as
supplemented by Department of Labor regulations (29 CFR Part 5).
(Construction contracts awarded by grantees and subgrantees in
excess of $2,000, and in excess of $2,500 for other contracts
that involve the employment of mechanics or laborers)
(7) Notice of awarding agency requirements and regulations
pertaining to reporting.
(8) Notice of awarding agency requirements and regulations
pertaining to patent rights with respect to any discovery or
invention which arises or is developed in the course of or under
(9) Awarding agency requirements and regulations pertaining
to copyrights and rights in data.
(10) Access by the grantee, the subgrantee, the Federal
agency, the Comptroller General of the United States, or any of
their duly authorized representatives to any books, documents,
papers, and records of the contractor which are directly
pertinent to that specific contract for the purpose of making
audits, examinations, excerpts, and transcriptions.
(11) Retention of all required records for three years after
grantees or subgrantees make final payments and all other pending
matters are closed.
(12) Compliance with all applicable standards, orders, or
requirements issued under section 306 of the Clean Air Act (42
U.S.C. 1857 (h)), section 508 of the Clean Water Act (33 U.S.C.
1368), Executive Order 11738, and Environmental Protection Agency
regulations (40 CFR Part 15). (Contracts, subcontracts, and
subgrants of amounts in excess of $100,000)
(13) Mandatory standards and policies relating to energy
efficiency which are contained in the state energy conservation
plan issued in compliance with the Energy Policy and Conservation
Act (Pub. L. 94-163).
(a) States. States shall follow state law and procedures
when awarding and administering subgrants (whether on a cost
reimbursement or fixed amount basis) of financial assistance to
local and Indian tribal governments. States shall:
(1) Ensure that every subgrant includes any clauses required
by Federal statute and Executive Orders and their implementing
(2) Ensure that subgrantees are aware of requirements
imposed upon them by Federal statute and regulation;
(3) Ensure that a provision for compliance with §97.42 is
placed in every cost reimbursement subgrant; and
(4) Conform any advances of grant funds to subgrantees
substantially to the same standards of timing and amount that
apply to cash advances by Federal agencies.
(b) All other grantees. All other grantees shall follow the
provisions of this part which are applicable to awarding agencies
when awarding and administering subgrants (whether on a cost
reimbursement or fixed amount basis) of financial assistance to
local and Indian tribal governments. Grantees shall:
(1) Ensure that every subgrant includes a provision for
compliance with this part;
(2) Ensure that every subgrant includes any clauses required
by Federal statute and Executive Orders and their implementing
(3) Ensure that subgrantees are aware of requirements
imposed upon them by Federal statutes and regulations.
(f) Exceptions. By their own terms, certain provisions of
this part do not apply to the award and administration of
(1) Section 97.10;
(2) Section 97.11;
(3) The letter-of-credit procedures specified in Treasury
Regulations at 31 CFR Part 205, cited in §97.21; and
(4) Section 97.50.
Reports, Records, Retention, and Enforcement
97.40 Monitoring and reporting program performance.
(a) Monitoring by grantees. Grantees are responsible for
managing the day-to-day operations of grant and subgrant
supported activities. Grantees must monitor grant and subgrant
supported activities to assure compliance with applicable Federal
requirements and that performance goals are being achieved.
Grantee monitoring must cover each program, function or activity.
(b) Nonconstruction performance reports. The Federal agency
may, if it decides that performance information found in
subsequent applications contains sufficient information to meet
its programmatic needs, require the grantee to submit a
performance report only upon expiration or termination of grant
support. Unless waived by the Federal agency this report will be
due on the same date as the final Financial Status Report.
(1) Grantees shall submit annual performance reports unless
the awarding agency requires quarterly or semi-annual reports.
However, performance reports will not be required more frequently
than quarterly. Annual reports shall be due 90 days after the
grant year, quarterly or semi-annual reports shall be due 30 days
after the reporting period. The final performance report will be
due 90 days after the expiration or termination of grant support.
If a justified request is submitted by a grantee, the Federal
agency may extend the due date for any performance report.
Additionally, requirements for unnecessary performance reports
may be waived by the Federal agency.
(2) Performance reports will contain, for each grant, brief
information on the following:
(i) A comparison of actual accomplishments to the objectives
established for the period. Where the output of the project can
be quantified, a computation of the cost per unit of output may
be required if that information will be useful.
(ii) The reasons for slippage if established objectives were
(iii) Additional pertinent information including, when
appropriate, analysis and explanation of cost overruns or high
(3) Grantees will not be required to submit more than the
original and two copies of performance reports.
(4) Grantees will adhere to the standards in this section in
prescribing performance reporting requirements for subgrantees.
(c) Construction performance reports. For the most part
on-site technical inspections and certified percentage-ofcompletion data are relied on heavily by Federal agencies to
monitor progress under construction grants and subgrants. The
Federal agency will require additional formal performance reports
only when considered necessary, and never more frequently than
(d) Significant developments. Events may occur between the
scheduled performance reporting dates which have a significant
impact on the grant or subgrant supported activities. In such
cases, the grantee must inform the Federal agency as soon as the
following types of conditions become known:
(1) problems, delays, or adverse conditions which will
materially impair the ability to meet the objectives of the
award. This disclosure must include a statement of the action
taken, or contemplated, and any assistance needed to resolve the
(2) Favorable developments which enable meeting time
schedules and objectives sooner or at less cost than anticipated
or producing more beneficial results than originally planned.
(e) The Federal agency may make site visits as warranted by
(f) Waivers, extensions. (1) The Federal agency may waive
any performance report required by this part if not needed.
(2) The grantee may waive any performance report from a
subgrantee when not needed. The grantee may extend the due date
for any performance report from a subgrantee if the grantee is
still able to meet its performance reporting obligations to the
97.41 Financial Reporting.
(a) General. (1) Except as provided in paragraphs (a)(2)
and (5) of this section, grantees will use only the forms
specified in paragraphs (a) through (c) of this section, and such
supplementary or other forms as may from time to time be
authorized by OMB, for:
(i) Submitting financial reports to the Federal agency, or
(ii) Requesting advances or reimbursements when letters of
credit are not used.
(2) Grantees need not apply the forms prescribed in this
section in dealing with their subgrantees. However, grantees
shall not impose more burdensome requirements on subgrantees.
(3) Grantees shall follow all applicable standard and
supplemental Federal agency instructions approved by OMB to the
extent required under the Paperwork Reduction Act of 1980 for use
in connection with forms specified in paragraphs (b) and (c) of
this section. Federal agencies may issue substantive
supplementary instructions only with the approval of OMB. The
Federal agency may shade out or instruct the grantee to disregard
any line item that the Federal agency finds unnecessary for its
decision making purposes.
(4) Grantees will not be required to submit more than the
original and two copies of forms required under this part.
(5) The Federal agency may provide computer outputs to
grantees to expedite or contribute to the accuracy of reporting.
The Federal agency may accept the required information from
grantees in machine usable format or computer printouts instead
of prescribed forms.
(6) The Federal agency may waive any report required by this
section if not needed.
(7) The Federal agency may extend the due date of any
financial report upon receiving a justified request from a
(b) Financial Status Report. (1) Form. Grantees will use
Standard Form 269 or 269A, Financial Status Report, to report the
status of funds for all nonconstruction grants and for
construction grants when required in accordance with
§97.41(e)(2)(ii) of this section.
(2) Accounting basis. Each grantee will report program
outlays and program income on a cash or accrual basis as
prescribed by the awarding agency. If the Federal agency
requires accrual information and the grantee's accounting records
are not normally kept on the accrual basis, the grantee shall not
be required to convert its accounting system but shall develop
such accrual information through an analysis of the documentation
(3) Frequency. The Federal agency may prescribe the
frequency of the report for each project or program. However,
the report will not be required more frequently than quarterly.
If the Federal agency does not specify the frequency of the
report, it will be submitted annually. A final report will be
required upon expiration or termination of grant support.
(4) Due date. When reports are required on a quarterly or
semiannual basis, they will be due 30 days after the reporting
period. When required on an annual basis, they will be due 90
days after the end of the grant year. Final reports will be due
90 days after the expiration or termination of grant support.
(c) Federal Cash Transactions Report. (1) Form. (i) For
grants paid by letter or credit, Treasury check advances or
electronic funds transfer, the grantee will submit the SF 272,
Federal Cash Transactions Report, and when necessary, its
continuation sheet, SF 272A, unless the terms of the award exempt
the grantee from this requirement.
(ii) These reports will be used by the Federal agency to
monitor cash advanced to grantees and to obtain disbursement or
outlay information for each grant from grantees. The format of
the report may be adapted as appropriate when reporting is to be
accomplished with the assistance of automatic data processing
equipment provided that the information to be submitted is not
changed in substance.
(2) Forecasts of Federal cash requirements. Forecasts of
Federal cash requirements may be required in the "Remarks"
section of the report.
(3) Cash in hands of subgrantees. When considered necessary
and feasible by the Federal agency, grantees may be required to
report the amount of cash advances in excess of three days' needs
in the hands of their subgrantees or contractors and to provide
short narrative explanations of actions taken by the grantee to
reduce the excess balances.
(4) Frequency and due date. Grantees must submit the report
no later than 15 working days following the end of each quarter.
However, where an advance either by letter of credit or
electronic funds transfer is authorized at an annualized rate of
one million dollars or more, the Federal agency may require the
report to be submitted within 15 working days following the end
of each month.
(d) Request for advance or reimbursement---(1) Advance
payments. Requests for Treasury check advance payments will be
submitted on Standard Form 270, Request for Advance or
Reimbursement. (This form will not be used for drawdowns under a
letter of credit, electronic funds transfer or when Treasury
check advance payments are made to the grantee automatically on a
(2) Reimbursement. Requests for reimbursement under
nonconstruction grants will also be submitted on Standard Form
270. (For reimbursement requests under construction grants, see
paragraph (e)(1) of this section.)
(3) The frequency for submitting payment requests is treated
(e) Outlay Report and Request for Reimbursement for
Construction Programs. (1) Grants that support construction
activities paid by reimbursement method.
(i) Requests for reimbursement under construction grants
will be submitted on Standard Form 271, Outlay Report and
Request-for Reimbursement for Construction Programs. Federal
agencies may, however, prescribe the Request for Advance or
Reimbursement form, specified in §97.41(d), instead of this form.
(ii) The frequency for submitting reimbursement requests is
treated in §97.41(b)(3).
(1) Grants that support construction activities paid by
letter of credit, electronic funds transfer or Treasury check
(2) When a construction grant is paid by letter of credit,
electronic funds transfer or Treasury check advances, the grantee
will report its outlays to the Federal agency using Outlay Report
and Request for Reimbursement for Construction Programs (SF 271).
The Federal agency will provide any necessary special
instructions. However, frequency and due date are governed by
§97.41(b)(3) and (4).
(ii) When a construction grant is paid by Treasury check
advances based on periodic requests from the grantee, the
advances will be requested on the form specified in §97.41(d).
(iii) The Federal agency may substitute the SF 269 or SF
269A as specified in §97.41(b) for the Outlay Report and Request
for Reimbursement for Construction Programs.
(3) Accounting basis. The accounting basis for the Outlay
Report and Request for Reimbursement for Construction Programs
shall be governed by §97.41(b)(2).
97.42 Retention and access requirements for records.
(a) Applicability. (1) This section applies to all
financial and programmatic records, supporting documents,
statistical records, and other records of grantees or subgrantees
(i) Required to be maintained by the terms of this part,
program regulations or the grant agreement, or
(ii) Otherwise reasonably considered as pertinent to program
regulations or the grant agreement.
(2) This section does not apply to records maintained by
contractors or subcontractors. For a requirement to place a
provision concerning records in certain kinds of contracts, see
(b) Length of retention period. (1) Except as otherwise
provided, records must be retained for three years from the
starting date specified in paragraph (c) of this section.
(2) If any litigation, claim, negotiation, audit or other
action involving the records has been started before the
expiration of the 3-year period, the records must be retained
until completion of the action and resolution of all issues which
arise from it, or until the end of the regular 3-year period,
whichever is later.
(3) To avoid duplicate recordkeeping, awarding agencies may
make special arrangements with grantees and subgrantees to retain
any records which are continuously needed for joint use. The
awarding agency will request transfer of records to its custody
when it determines that the records possess long-term retention
value. When the records are transferred to or maintained by the
Federal agency, the 3-year retention requirement does not apply
to the grantee or subgrantee.
(c) Starting date of retention period. (1) General. When
grant support is continued or renewed at annual or other
intervals, the retention period for the records of each funding
period starts on the day the grantee or subgrantee submits to the
awarding agency its single or last expenditure report for that
period. However, if grant support is continued or renewed
quarterly, the retention period for each year's records starts on
the day the grantee submits its expenditure report for the last
quarter of the Federal fiscal year. In all other cases, the
retention period starts on the day the grantee submits its final
expenditure report. If the expenditure report has been waived,
the retention period starts on the day the report would have been
(2) Real property and equipment records. The retention
period for real property and equipment records starts from the
date of the disposition or replacement or transfer at the
direction of the awarding agency.
(3) Records for income transactions after grant or subgrant
support. In cases where grantees must report income after the
period of grant support, the retention period for the records
pertaining to the income earned during that period starts at the
end of the grantee's fiscal year in which the income is earned.
(4) Indirect cost rate proposals, cost allocations plans,
etc. This paragraph applies to the following types of documents,
and their supporting records: indirect cost rate computations or
proposals, cost allocation plans, and any similar accounting
computations of the rate at which a particular group of costs is
chargeable (such as computer usage chargeback rates or composite
fringe benefit rates).
(i) If submitted for negotiation. If the proposal, plan, or
other computation is required to be submitted to the Federal
Government (or to the grantee) to form the basis for negotiation
of the rate, then the 3-year retention period for its supporting
records starts on the date of such submission.
(ii) If not submitted for negotiation. If the proposal,
plan, or other computation is not required to be submitted to the
Federal Government (or to the grantee) for negotiation purposes,
then the 3-year retention period for the proposal plan, or
computation and its supporting records starts at the end of the
fiscal year (or other accounting period) covered by the proposal,
plan, or other computation.
(d) Substitution of microfilm. Copies made by microfilming,
photocopying, or similar methods may be substituted for the
(e) Access to records. (1) Records of grantees and
subgrantees. The awarding agency and the Comptroller General of
the United States, or any of their authorized representatives,
shall have the right of access to any books, documents, papers,
or other records of grantees and subgrantees that are pertinent
to the grant, in order to make audits, examinations, excerpts,
(2) Expiration of right of access. The rights of access in
this section must not be limited to the required retention period
but shall last as long as the records are retained.
(f) Restrictions on public access. The Federal Freedom of
Information Act (5 U.S.C. 552) does not apply to records owned
and possessed by grantees. Unless required by Federal, State, or
local law, grantees and subgrantees are not required to permit
public access to their records.
(a) Remedies for noncompliance. If a grantee or subgrantee
materially fails to comply with any term of an award, whether
stated in Federal statute or regulation, an assurance, in a State
plan or application, a notice of award, or elsewhere, the
awarding agency may take one or more of the following actions, as
appropriate in the circumstances:
(1) Temporarily withhold cash payments pending correction of
the deficiency by the grantee or subgrantee or more severe
enforcement action by the awarding agency;
(2) Disallow (that is, deny both use of funds and matching
credit for) all or part of the cost of the activity or action not
(3) Wholly or partly suspend or terminate the current award
for the grantee's or subgrantee's program;
(4) Withhold further awards for the program; or
(5) Take other remedies that may be legally available.
(b) Hearings, appeals. In taking an enforcement action, the
awarding agency will provide the grantee or subgrantee an
opportunity for such hearing, appeal, or other administrative
proceeding to which the grantee or subgrantee is entitled under
any statute or regulation applicable to the action involved.
(c) Effects of suspension and termination. Costs of a
grantee or a subgrantee resulting from obligations incurred by
the grantee or subgrantee during a suspension or after
termination of an award are not allowable unless the awarding
agency expressly authorizes them in the notice of suspension or
termination or subsequently. Other grantee or subgrantee costs
during suspension or after termination which are necessary and
not reasonably avoidable are allowable if:
(1) The costs result from obligations which were properly
incurred by the grantee or subgrantee before the effective date
of suspension or termination are not in anticipation of it and,
in the case of a termination, are noncancellable; and
(2) The costs would be allowable if the award were not
suspended or expired normally at the end of the funding period in
which the termination takes effect.
(d) Relationship to Debarment and Suspension. The
enforcement remedies identified in this section, including
suspension and termination, do not preclude a grantee or
subgrantee from being subject to "Debarment and Suspension" under
Executive Order 12549 (see §97.35).
97.44 Termination for convenience.
Except as provided in §97.43 awards may be terminated in
whole or in part only as follows:
(a) By the awarding agency with the consent of the grantee
or subgrantee, in which case the two parties shall agree upon the
termination conditions, including the effective date and, in the
case of partial termination, the portion to be terminated; or
(b) By the grantee or subgrantee upon written notification
to the awarding agency, setting forth the reasons for such
termination, the effective date, and, in the case of partial
termination, the portion to be terminated. However, if, in the
case of a partial termination, the awarding agency determines
that the remaining portion of the award will not accomplish the
purposes for which the award was made, the awarding agency may
terminate the award in its entirety under §97.43 or paragraph (a)
of this section.
Subpart D--After-The-Grant Requirements
(a) General. The Federal agency will close out the award
when it determines that all applicable administrative actions and
all required work of the grant has been completed.
(b) Reports. Within 90 days after the expiration or
termination of the grant, the grantee must submit all financial,
performance, and other reports required as a condition of the
grant. Upon written request by the grantee, Federal agencies may
extend this timeframe. These may include but are not limited to:
(1) Final performance or progress report;
(2) Financial Status Report (SF 269) or Outlay Report and
Request for Reimbursement for Construction Programs (SF-271) (as
(3) Final request for payment (SF-270) (if applicable);
(4) Invention disclosure (if applicable); and
(5) Federally-owned property report. In accordance with
§97.32(f), a grantee must submit an inventory of all federally-owned property (as distinct from property acquired with grant
funds) for which it is accountable and request disposition
instructions from the Federal agency of property no longer
(c) Cost adjustment. The Federal agency will, within 90
days after receipt of reports in paragraph (b) of this section,
make upward or downward adjustments to the allowable costs.
(d) Cash adjustments. (1) The Federal agency will make
prompt payment to the grantee for allowable reimbursable costs.
(2) The grantee must immediately refund to the Federal
agency any balance of unobligated (unencumbered) cash advanced
that is not authorized to be retained for use on other grants.
97.51 Later disallowances and adjustments.
The closeout of a grant does not affect:
(a) The Federal agency's right to disallow costs and recover
funds on the basis of a later audit or other review;
(b) The grantee's obligation to return any funds due as a
result of later refunds, corrections, or other transactions;
(c) Records retention as required in 97.42;
(d) Property management requirements in §§97.31 and 97.32;
(e) Audit requirements in §97.26.
97.52 Collection of amounts due.
(a) Any funds paid to a grantee in excess of the amount to
which the grantee is finally determined to be entitled under the
terms of the award constitute a debt to the Federal Government.
If not paid within a reasonable period after demand, the Federal
agency may reduce the debt by:
(1) Making an administrative offset against other requests
(2) Withholding advance payments otherwise due to the
(3) Other action permitted by law.
(b) Except where otherwise provided by statutes or
regulations, the Federal agency will charge interest on an
overdue debt in accordance with the Federal Claims Collection
Standards (4 CFR Ch. II). The date from which interest is
computed is not extended by litigation or the filing of any form
Subpart E-Entitlements [Reserved]