ment in the commercial sector (it does not include development of military systems and hardware where specific requirements have been defined). Small award. An award not exceeding the simplified acquisition threshold fixed at 41 U.S.C. 403(11) (currently $100,000). Small business concern. A concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it has applied for an award, and qualified as a small business under the criteria and size standards in 13 CFR part 121. For more details, grants officers should see 48 CFR part 19 in the "Federal Acquisition Regulation." Subaward. Financial assistance in the form of money, or property in lieu of money, provided under an award by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. The term includes financial assistance when provided by any legal agreement, even if the agreement is called a contract, but the term includes neither procurement of goods and services nor any form of assistance which is excluded from the definition of "award" in this section. Subrecipient. The legal entity to which a subaward is made and which is accountable to the recipient for the use of the funds provided. Supplies. Tangible expendable personal property that is charged directly to the award and that has a useful life of less than one year or an acquisition cost of less than $5000 per unit. Suspension. An action by a DoD Component that temporarily withdraws Federal sponsorship under an award, pending corrective action by the recipient or pending a decision to terminate the award by the DoD Component. Suspension of an award is a separate action from suspension of a recipient under 32 CFR part 25. Termination. The cancellation of an award, in whole or in part, under an agreement at any time prior to either: (1) The date on which all work under an award is completed; or (2) The date on which Federal sponsorship ends, as given on the award document or any supplement or amendment thereto. Third party in-kind contributions. The value of non-cash contributions provided by non-Federal third parties. Third party in-kind contributions may be in the form of real property, equipment, supplies and other expendable property, and the value of goods and services directly benefiting and specifically identifiable to the project or program. Unobligated balance. The portion of the funds authorized by a DoD Component that has not been obligated by the recipient and is determined by deducting the cumulative obligations from the cumulative funds authorized. § 34.3 Deviations. (a) Individual deviations. Individual deviations affecting only one award may be approved by DoD Components in accordance with procedures stated in 32 CFR 21.125(a). (b) Small awards. DoD Components may apply less restrictive requirements than the provisions of this part when awarding small awards, except for those requirements which are statutory. (c) Other class deviations. For classes of awards other than small awards, the Director, Defense Research and Engineering, or his or her designee, may grant exceptions from the requirements of this part when exceptions are not prohibited by statute. DoD Components shall request approval for such deviations in accordance with 32 CFR 21.125 (b) and (c). § 34.4 Special award conditions. (a) Grants officers may impose additional requirements as needed, over and above those provided in this part, if an applicant or recipient: (1) Has a history of poor performance; (2) Is not financially stable; (3) Has a management system that does not meet the standards prescribed in this part; (4) Has not conformed to the terms and conditions of a previous award; or (5) Is not otherwise responsible. (b) Before imposing additional requirements, DoD Components shall notify the applicant or recipient in writing as to: (1) The nature of the additional requirements; (2) The reason why the additional requirements are being imposed; (3) The nature of the corrective action needed; (4) The time allowed for completing the corrective actions; and (5) The method for requesting reconsideration of the additional requirements imposed. (c) Any special conditions shall be promptly removed once the conditions that prompted them have been corrected. (d) Grants officers: (1) Should coordinate the imposition and removal of special award conditions with the cognizant grants administration office identified in 32 CFR 22.710. (2) Shall include in the award file the written notification to the recipient, described in paragraph (b) of this section, and the documentation required by 32 CFR 22.410(b). Subpart B-Post-award FINANCIAL AND PROGRAM MANAGEMENT $34.10 Purpose of financial and program management. Sections 34.11 through 34.17 prescribe standards for financial management systems; methods for making payments; and rules for cost sharing and matching, program income, revisions to budgets and program plans, audits, allowable costs, and fee and profit. §34.11 Standards for financial management systems. (a) Recipients shall be allowed and encouraged to use existing financial management systems established for doing business in the commercial marketplace, to the extent that the systems comply with Generally Accepted Accounting Principles (GAAP) and the minimum standards in this section. As a minimum, a recipient's financial management system shall provide: (1) Effective control of all funds. Control systems must be adequate to ensure that costs charged to Federal funds and those counted as the recipient's cost share or match are consistent with requirements for cost reasonableness, allowability, and allocability in the applicable cost principles (see §34.17) and in the terms and conditions of the award. (2) Accurate, current and complete records that document for each project funded wholly or in part with Federal funds the source and application of the Federal funds and the recipient's required cost share or match. These records shall: (i) Contain information about receipts, authorizations, assets, expenditures, program income, and interest. (ii) Be adequate to make comparisons of outlays with budgeted amounts for each award (as required for programmatic and financial reporting under § 34.41. Where appropriate, financial information should be related to performance and unit cost data. Note that unit cost data are generally not appropriate for awards that support research. (3) To the extent that advance payments are authorized under §34.12, procedures that minimize the time elapsing between the transfer of funds to the recipient from the Government and the recipient's disbursement of the funds for program purposes. (4) The recipient shall have a system to support charges to Federal awards for salaries and wages, whether treated as direct or indirect costs. Where employees work on multiple activities or cost objectives, a distribution of their salaries and wages will be supported by personnel activity reports which must: (i) Reflect an after the fact distribution of the actual activity of each employee. (ii) Account for the total activity for which each employee is compensated. (iii) Be prepared at least monthly, and coincide with one or more pay periods. (b) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the DoD Component, at its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the recipient are not deemed adequate to protect the interest of the Federal Government. (c) The DoD Component may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest. (d) Where bonds are required in the situations described above, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223, "Surety Companies Doing Business with the United States." § 34.12 Payment. (a) Methods available. Payment methods for awards with for-profit organizations are: (1) Reimbursement. Under this method, the recipient requests reimbursement for costs incurred during a time period. In cases where the recipient submits each request for payment to the grants officer, the DoD payment office reimburses the recipient by electronic funds transfer or check after approval of the request by the grants officer designated to do so. (2) Advance payments. Under this method, a DoD Component makes a payment to a recipient based upon projections of the recipient's cash needs. The payment generally is made upon the recipient's request, although predetermined payment schedules may be used when the timing of the recipient's needs to disburse funds can be predicted in advance with sufficient accuracy to ensure compliance with paragraph (b)(2)(iii) of this section. (b) Selecting a method. (1) The preferred payment method is the reimbursement method, as described in paragraph (a)(1) of this section (2) Advance payments, as described in paragraph (a)(2) of this section, may be used in exceptional circumstances, subject to the following conditions: (i) The grants officer, in consultation with the program official, must judge that advance payments are necessary or will materially contribute to the probability of success of the project contemplated under the award (e.g., as startup funds for a project performed by a newly formed company). The rationale for the judgment shall be documented in the award file. (ii) Cash advances shall be limited to the minimum amounts needed to carry out the program. (iii) Recipients and the DoD Component shall maintain procedures to ensure that the timing of cash advances is as close as is administratively feasible to the recipients' disbursements of the funds for program purposes, including direct program or project costs and the proportionate share of any allowable indirect costs. (iv) Recipients shall maintain advance payments of Federal funds in interest-bearing accounts, and remit annually the interest earned to the administrative grants officer responsible for post-award administration (the grants officer shall forward the payment to the responsible payment office, for return to the Department of Treasury's miscellaneous receipts account), unless one of the following applies: (A) The recipient receives less than $120,000 in Federal awards per year. (B) The best reasonably available interest bearing account would not be expected to earn interest in excess of $250 per year on Federal cash balances. (C) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources. (c) Frequency of payments. For either reimbursements or advance payments, recipients shall be authorized to submit requests for payment at least monthly. (d) Forms for requesting payment. DoD Components may authorize recipients to use the SF-270,1 "Request for Advance or Reimbursement;" the SF-271,2 "Outlay Report and Request for Reimbursement for Construction Programs;" or prescribe other forms or formats as necessary. (e) Timeliness of payments. Payments normally will be made within 30 calendar days of the receipt of a recipient's request for reimbursement or advance by the office designated to receive the request (for further information about timeframes for payments, see 32 CFR 22.810(c)(3)(ii)). (f) Precedence of other available funds. Recipients shall disburse funds available from program income, rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments. (g) Withholding of payments. Unless otherwise required by statute, grants officers shall not withhold payments for proper charges made by recipients during the project period for reasons other than the following: (1) A recipient has failed to comply with project objectives, the terms and conditions of the award, or Federal reporting requirements, in which case the grants officer may suspend payments in accordance with §34.52. (2) The recipient is delinquent on a debt to the United States (see definitions of "debt" and "delinquent debt" in 32 CFR 22.105). In that case, the grants officer may, upon reasonable notice, withhold payments for obligations 1 For copies of Standard Forms listed in this part, contact regional grants administration offices of the Office of Naval Research. Addresses for the offices are listed in the "DoD Directory of Contract Administration Services Components," DLAH 4105.4, which can be obtained from either: Defense Logistics Agency, Publications Distribution Division (DASC-WDM), 8725 John J. Kingman Rd., Suite 0119, Fort Belvoir, VA 220606220; or the Defense Contract Management Command home page at http:// www.dcmc.dcrb.dla.mil. 2 See footnote 1 to this paragraph (d). incurred after a specified date, until the debt is resolved. § 34.13 Cost sharing or matching. (a) Acceptable contributions. All contributions, including cash contributions and third party in-kind contributions, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria: (1) They are verifiable from the recipient's records. (2) They are not included as contributions for any other federally-assisted project or program. (3) They are necessary and reasonable for proper and efficient accomplishment of project or program objectives. (4) They are allowable under §34.17. (5) They are not paid by the Federal Government under another award, except: (i) Costs that are authorized by Federal statute to be used for cost sharing or matching; or (ii) Independent research and development (IR&D) costs. In accordance with the for-profit cost principle in 48 CFR 31.205-18(e), use of IR&D as cost sharing is permitted, whether or not the Government decides at a later date to reimburse any of the IR&D as allowable indirect costs. In such cases, the IR&D must meet all of the criteria in paragraphs (a) (1) through (4) and (a) (6) through (8) of this section. (6) They are provided for in the approved budget, when approval of the budget is required by the DoD Component. (7) If they are real property or equipment, whether purchased with recipient's funds or donated by third parties, they must have the grants officer's prior approval if the contributions' value is to exceed depreciation or use charges during the project period (paragraphs (b)(1) and (b)(4)(ii) of this section discuss the limited circumstances under which a grants officer may approve higher values). If a DoD Component requires approval of a recipient's budget (see paragraph (a)(6) of this section), the grants officer's approval of the budget satisfies this prior approval requirement, for real property or equipment items listed in the budget. (8) They conform to other provisions of this part, as applicable. (b) Valuing and documenting contributions—(1) Valuing recipient's property or services of recipient's employees. Values shall be established in accordance with the applicable cost principles in §34.17, which means that amounts chargeable to the project are determined on the basis of costs incurred. For real property or equipment used on the project, the cost principles authorize depreciation or use charges. The full value of the item may be applied when the item will be consumed in the performance of the award or fully depreciated by the end of the award. In cases where the full value of a donated capital asset is to be applied as cost sharing or matching, that full value shall be the lesser of the following: (i) The certified value of the remaining life of the property recorded in the recipient's accounting records at the time of donation; or (ii) The current fair market value. However, when there is sufficient justification, the grants officer may approve the use of the current fair market value of the donated property, even if it exceeds the certified value at the time of donation to the project. The grants officer may accept the use of any reasonable basis for determining the fair market value of the property. (2) Valuing services of others' employees. When an employer other than the recipient furnishes the services of an employee, those services shall be valued at the employee's regular rate of pay plus an amount of fringe benefits and overhead (at an overhead rate appropriate for the location where the services are performed) provided these services are in the same skill for which the employee is normally paid. (3) Valuing volunteer services. Volunteer services furnished by professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for volunteer services shall be consistent with those paid for similar work in the recipient's organization. In those instances in which the required skills are not found in the recipient organization, rates shall be consistent with those paid for similar work in the labor market in which the recipient competes for the kind of services involved. In either case, paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation. (4) Valuing property donated by third parties. (i) Donated supplies may include such items as office supplies or laboratory supplies. Value assessed to donated supplies included in the cost sharing or matching share shall be reasonable and shall not exceed the fair market value of the property at the time of the donation. (ii) Normally only depreciation or use charges for equipment and buildings may be applied. However, the fair rental charges for land and the full value of equipment or other capital assets may be allowed, when they will be consumed in the performance of the award or fully depreciated by the end of the award, provided that the grants officer has approved the charges. When use charges are applied, values shall be determined in accordance with the usual accounting policies of the recipient, with the following qualifications: (A) The value of donated space shall not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality. (B) The value of loaned equipment shall not exceed its fair rental value. (5) Documentation. The following requirements pertain to the recipient's supporting records for in-kind contributions from third parties: (i) Volunteer services shall be documented and, to the extent feasible, supported by the same methods used by the recipient for its own employees. (ii) The basis for determining the valuation for personal services and property shall be documented. |