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51912 Federal Register/Vol. 70, No. 168 /Wednesday, August 31, 2005 /Rules and Regulations
<br />exemptions would be from all but the
<br />allocability of costs provisions of Appendix
<br />A subsection C.3 of 2 CFR part 225, Cost
<br />Principles for State, Local, and Indian Tribal
<br />Governments (OMB Circular A -87);
<br />Appendix A, Section C.4 of 2 CFR 220, Cost
<br />Principles for Educational Institutions
<br />(Circular A -21); Appendix A, subsection A.4
<br />of 2 CFR 230 Cost Principles for Non -Profit
<br />Organizations (Circular A -122); and from all
<br />of the administrative requirements provisions
<br />of 2 CFR part 215, Uniform Administrative
<br />Requirements for Grants and Agreements
<br />with Institutions of Higher Education,
<br />Hospitals, and Other Non - Profit
<br />Organizations (Circular A -110), and the
<br />agencies' grants management common rule.
<br />(3) When a Federal agency provides this
<br />flexibility, as a prerequisite to a State's
<br />exercising this option, a State must adopt its
<br />own written fiscal and administrative
<br />requirements for expending and accounting
<br />for all funds, which are consistent with the
<br />provisions of 2 CFR part 225 (OMB Circular
<br />A -87), and extend such policies to all
<br />subrecipients. These fiscal and
<br />administrative requirements must be
<br />sufficiently specific to ensure that: Funds are
<br />used in compliance with all applicable
<br />Federal statutory and regulatory provisions,
<br />costs are reasonable and necessary for
<br />operating these programs, and funds are not
<br />used for general expenses required to carry
<br />out other responsibilities of a State or its
<br />subrecipients.
<br />B. Definitions
<br />1. "Approval or authorization of the
<br />awarding or cognizant Federal agency"
<br />means documentation evidencing consent
<br />prior to incurring a specific cost. If such costs
<br />are specifically identified in a Federal award
<br />document, approval of the document
<br />constitutes approval of the costs. If the costs
<br />are covered by a State /local -wide cost
<br />allocation plan or an indirect cost proposal,
<br />approval of the plan constitutes the approval.
<br />2. "Award" means grants, cost
<br />reimbursement contracts and other
<br />agreements between a State, local and Indian
<br />tribal government and the Federal
<br />Government.
<br />3. "Awarding agency" means (a) with
<br />respect to a grant, cooperative agreement, or
<br />cost reimbursement contract, the Federal
<br />agency, and (b) with respect to a subaward,
<br />the party that awarded the subaward.
<br />4. "Central service cost allocation plan"
<br />means the documentation identifying,
<br />accumulating, and allocating or developing
<br />billing rates based on the allowable costs of
<br />services provided by a governmental unit on
<br />a centralized basis to its departments and
<br />agencies. The costs of these services may be
<br />allocated or billed to users.
<br />5 "Claim" means a written demand or
<br />written assertion by the governmental unit or
<br />grantor seeking, as a matter of right, the
<br />payment of money in a sum certain, the
<br />adjustment or interpretation of award terms,
<br />or other relief arising under or relating to the
<br />award. A voucher, invoice or other routine
<br />request for payment that is not a dispute
<br />when submitted is not a claim. Appeals, such
<br />as those filed by a governmental unit in
<br />response to questioned audit costs, are not
<br />considered claims until a final management
<br />decision is made by the Federal awarding
<br />agency.
<br />6. "Cognizant agency" means the Federal
<br />agency responsible for reviewing,
<br />negotiating, and approving cost allocation
<br />plans or indirect cost proposals developed
<br />under 2 CFR part 225 on behalf of all Federal
<br />agencies. OMB publishes a listing of
<br />cognizant agencies.
<br />7. "Common Rule" means the "Uniform
<br />Administrative Requirements for Grants and
<br />Cooperative Agreements to State and Local
<br />Governments; Final Rule" originally issued
<br />at 53 FR 8034 -8103 (March 11, 1988). Other
<br />common rules will be referred to by their
<br />specific titles.
<br />8. "Contract" means a mutually binding
<br />legal relationship obligating the seller to
<br />furnish the supplies or services (including
<br />construction) and the buyer to pay for them.
<br />It includes all types of commitments that
<br />obligate the government to an expenditure of
<br />appropriated funds and that, except as
<br />otherwise authorized, are in writing. In
<br />addition to bilateral instruments, contracts
<br />include (but are not limited to): Awards and
<br />notices of awards; job orders or task orders
<br />issued under basic ordering agreements;
<br />letter contracts; orders, such as purchase
<br />orders, under which the contract becomes
<br />effective by written acceptance or
<br />performance; and, bilateral contract
<br />modifications. Contracts do not include
<br />grants and cooperative agreements covered
<br />by 31 U.S.C. 6301 et seq.
<br />9. "Cost" means an amount as determined
<br />on a cash, accrual, or other basis acceptable
<br />to the Federal awarding or cognizant agency.
<br />It does not include transfers to a general or
<br />similar fund.
<br />10. "Cost allocation plan" means central
<br />service cost allocation plan, public assistance
<br />cost allocation plan, and indirect cost rate
<br />proposal. Each of these terms is further
<br />defined in this section.
<br />11. "Cost objective" means a function,
<br />organizational subdivision, contract, grant, or
<br />other activity for which cost data are needed
<br />and for which costs are incurred.
<br />12. "Federally- recognized Indian tribal
<br />government" means the governing body or a
<br />governmental agency of any Indian tribe,
<br />band, nation, or other organized group or
<br />community (including any native village as
<br />defined in Section 3 of the Alaska Native
<br />Claims Settlement Act, 85 Stat. 688) certified
<br />by the Secretary of the Interior as eligible for
<br />the special programs and services provided
<br />through the Bureau of Indian Affairs.
<br />13. "Governmental unit" means the entire
<br />State, local, or federally - recognized Indian
<br />tribal government, including any component
<br />thereof. Components of governmental units
<br />may function independently of the
<br />governmental unit in accordance with the
<br />term of the award.
<br />14. "Grantee department or agency" means
<br />the component of a State, local, or federally -
<br />recognized Indian tribal government which is
<br />responsible for the performance or
<br />administration of all or some part of a
<br />Federal award.
<br />15. "Indirect cost rate proposal" means the
<br />documentation prepared by a governmental
<br />unit or component thereof to substantiate its
<br />request for the establishment of an indirect
<br />cost rate as described in Appendix E of 2 CFR
<br />part 225.
<br />16. "Local government" means a county,
<br />municipality, city, town, township, local
<br />public authority, school district, special
<br />district, intrastate district, council of
<br />governments (whether or not incorporated as
<br />a non -profit corporation under State law),
<br />any other regional or interstate government
<br />entity, or any agency or instrumentality of a
<br />local government.
<br />17. "Public assistance cost allocation plan"
<br />means a narrative description of the
<br />procedures that will be used in identifying,
<br />measuring and allocating all administrative
<br />costs to all of the programs administered or
<br />supervised by State public assistance
<br />agencies as described in Appendix D of 2
<br />CFR part 225.
<br />18. "State" means any of the several States
<br />of the United States, the District of Columbia,
<br />the Commonwealth of Puerto Rico, any
<br />territory or possession of the United States,
<br />or any agency or instrumentality of a State
<br />exclusive of local governments.
<br />C. Basic Guidelines
<br />1. Factors affecting allowability of costs. To
<br />be allowable under Federal awards, costs
<br />must meet the following general criteria:
<br />a. Be necessary and reasonable for proper
<br />and efficient performance and administration
<br />of Federal awards.
<br />b. Be allocable to Federal awards under the
<br />provisions of 2 CFR part 225.
<br />c. Be authorized or not prohibited under
<br />State or local laws or regulations.
<br />d. Conform to any limitations or exclusions
<br />set forth in these principles, Federal laws,
<br />terms and conditions of the Federal award,
<br />or other governing regulations as to types or
<br />amounts of cost items.
<br />e. Be consistent with policies, regulations,
<br />and procedures that apply uniformly to both
<br />Federal awards and other activities of the
<br />governmental unit.
<br />f. Be accorded consistent treatment. A cost
<br />may not be assigned to a Federal award as
<br />a direct cost if any other cost incurred for the
<br />same purpose in like circumstances has been
<br />allocated to the Federal award as an indirect
<br />cost.
<br />g. Except as otherwise provided for in 2
<br />CFR part 225, be determined in accordance
<br />with generally accepted accounting
<br />principles.
<br />h. Not be included as a cost or used to meet
<br />cost sharing or matching requirements of any
<br />other Federal award in either the current or
<br />a prior period, except as specifically
<br />provided by Federal law or regulation.
<br />i. Be the net of all applicable credits.
<br />j. Be adequately documented.
<br />2. Reasonable costs. A cost is reasonable if,
<br />in its nature and amount, it does not exceed
<br />that which would be incurred by a prudent
<br />person under the circumstances prevailing at
<br />the time the decision was made to incur the
<br />cost. The question of reasonableness is
<br />particularly important when governmental
<br />units or components are predominately
<br />federally - funded. In determining
<br />reasonableness of a given cost, consideration
<br />shall be given to:
<br />a. Whether the cost is of a type generally
<br />recognized as ordinary and necessary for the
<br />operation of the governmental unit or the
<br />performance of the Federal award.
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