accountable to the recipient for the use of the funds provided. Supplies. All personal property excluding equipment, intangible property, and debt instruments as defined in this section, and inventions of a contractor conceived or first actually reduced to practice in the performance of work under a funding agreement ("subject inventions"), as defined in 37 CFR part 401, "Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts, and Cooperative Agreements." 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 participant under 32 CFR part 25. Termination. The cancellation of an award, in whole or in part, at any time prior to the date of completion. 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 the value of goods and services directly benefiting and specifically identifiable to the project or program. Unliquidated obligations. The amount of obligations incurred by the recipient: (1) That have not been paid, if financial reports are prepared on a cash basis. (2) For which an outlay has not been recorded, if reports are prepared on an accrued expenditure basis. 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. Unrecovered indirect cost. The difference between the amount awarded and the amount which could have been awarded under the recipient's approved negotiated indirect cost rate. Working capital advance. A procedure whereby funds are advanced to the re cipient to cover its estimated disbursement needs for a given initial period. § 32.3 Effect on other issuances. For awards subject to this part, all administrative requirements of codified program regulations, program manuals, handbooks and other nonregulatory materials which are inconsistent with the requirements of this part shall be superseded, except to the extent they are required by statute, or authorized in accordance with the deviations provision in § 32.4. § 32.4 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) and (c). (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. (1) For classes of awards other than small awards, the Director of Defense Research and Engineering (DDR&E), or his or her designee, may grant exceptions from the requirements of this part: (i) With the written concurrence of the Office of the Management and Budget (OMB). The DDR&E, or his or her designee, shall provide written notification to OMB of the Department of Defense's intention to grant a class deviation; and (ii) When exceptions are not prohibited by statute. (2) DoD Components shall request approval for such deviations in accordance with 32 CFR 21.125(b) and (c). However, in the interest of maximum uniformity, exceptions from the requirements of this part shall be permitted only in unusual circumstances. § 32.5 Subawards. Unless sections of this part specifically exclude subrecipients from coverage, the provisions of this part shall be applied to subrecipients performing work under awards if such subrecipients are institutions of higher education, hospitals or other non-profit organizations. State and local government subrecipients are subject to the provisions of 32 CFR part 33. Subrecipients that are for-profit organizations are subject to 32 CFR part 34. Subpart B-Pre-Award § 32.10 Purpose. Sections 32.11 through 32.17 prescribe application forms and instructions and other pre-award matters. § 32.11 Pre-award policies. (a) Use of grants, cooperative agreements, and contracts. (1) OMB Circular A-110 states that: (i) In each instance, the Federal awarding agency shall decide on the appropriate award instrument (i.e., grant, cooperative agreement, or contract). (ii) The Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301– 6308) governs the use of grants, cooperative agreements, and contracts. Under that Act: (A) A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation statute. authorized by Federal (B) Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government. (C) The statutory criterion for choosing between grants and cooperative agreements is that for the latter, "substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement." (2) In selecting the appropriate award instruments, DoD Components' grants officers shall comply with the DoD implementation of the Federal Grant and Cooperative Agreement Act at 32 CFR 21.205(a) and 32 CFR part 22, subpart B. (b) Public notice and priority setting. As a matter of Governmentwide policy, Federal awarding agencies shall notify the public of intended funding prior ities for programs that use discretionary awards, unless funding priorities are established by Federal statute. For DoD Components, compliance with competition policies and statutory requirements implemented in 32 CFR part 22, subpart C, shall constitute compliance with this Governmentwide policy. § 32.12 Forms for applying for Federal assistance. (a) DoD Components shall comply with the applicable report clearance requirements of 5 CFR part 1320, "Controlling Paperwork Burdens on the Public," with regard to all forms used in place of or as a supplement to the Standard Form 4242 (SF-424) series. (b) Applicants shall use the SF-424 series or those forms and instructions prescribed by DoD Components. (c) For Federal programs covered by E.O. 12372 (3 CFR, 1982 Comp., p. 197), "Intergovernmental Review of Federal Programs,” the applicant shall complete the appropriate sections of the SF-424 (Application for Federal Assistance) indicating whether the application was subject to review by the State Single Point of Contact (SPOC). The name and address of the SPOC for a particular State can be obtained from the DoD Component or the Catalog of Federal Domestic Assistance. The SPOC shall advise the applicant whether the program for which application is made has been selected by that State for review. (d) DoD Components that do not use the SF-424 form should indicate whether the application is subject to review by the State under E.O. 12372. § 32.13 Debarment and suspension. DoD Components and recipients shall comply with the nonprocurement debarment and suspension common rule at 32 CFR part 25. This common rule 2 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: Defense Logistics Agency, Publications Distribution Division (DASC-WDM), 8725 John J. Kingman Rd., Suite 0119, Fort Belvoir, VA 22060–6220. restricts subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. §32.14 Special award conditions. (a) DoD Components 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). $32.15 Metric system of measurement. The Metric Conversion Act, as amended by the Omnibus Trade and Competitiveness Act (15 U.S.C. 205) declares that the metric system is the preferred measurement system for U.S. trade and commerce, and for Federal agencies' procurements, grants, and other business-related activities. DoD grants officers shall comply with requirements concerning the use of the metric system at 32 CFR 22.530. § 32.16 Resource Conservation and Recovery Act (RCRA). Recipients' procurements shall comply with applicable requirements of the Resource Conservation and Recovery Act (RCRA), as described at §32.49. $32.17 Certifications and representations. (a) OMB Circular A-110 authorizes and encourages each Federal agency, unless prohibited by statute or codified regulation, to allow recipients to submit certifications and representations required by statute, executive order, or regulation on an annual basis, if the recipients have ongoing and continuing relationships with the agency. The Circular further states that annual certifications and representations, when used, shall be signed by responsible officials with the authority to ensure recipients' compliance with the pertinent requirements. (b) DoD grants officers shall comply with the provisions concerning certifications and representations at 32 CFR 22.510. Those provisions ease burdens on recipients to the extent possible, given current statutory and regulatory impediments to obtaining all certifications on an annual basis. The provisions thereby also comply with the intent of OMB Circular A-110, to use less burdensome methods for obtaining certifications and representations, as such methods become feasible. Subpart C-Post-Award FINANCIAL AND PROGRAM MANAGEMENT § 32.20 Purpose of financial and program management. Sections 32.21 through 32.28 prescribe standards for financial management systems, methods for making payments and rules for: satisfying cost sharing and matching requirements, accounting for program income, budget revision approvals, making audits, determining allowability of cost, and establishing fund availability. § 32.21 Standards for financial management systems. (a) DoD Components shall require recipients to relate financial data to performance data and develop unit cost information whenever practical. For awards that support research, it should be noted that it is generally not appropriate to develop unit cost information. (b) Recipients' financial management systems shall provide for the following. (1) Accurate, current and complete disclosure of the financial results of each federally-sponsored project or program in accordance with the reporting requirements set forth in §32.52. If a DoD Component requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient shall not be required to establish an accrual accounting system. These recipients may develop such accrual data for its reports on the basis of an analysis of the documentation on hand. (2) Records that identify adequately the source and application of funds for federally-sponsored activities. These records shall contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, outlays, income and interest. (3) Effective control over and accountability for all funds, property and other assets. Recipients shall adequately safeguard all such assets and assure they are used solely for authorized purposes. (4) Comparison of outlays with budget amounts for each award. Whenever appropriate, financial information should be related to performance and unit cost data. As discussed in paragraph (a) of this section, unit cost data is generally not appropriate for awards that support research. (5) Written procedures to minimize the time elapsing between the transfer of funds to the recipient from the U.S. Treasury and the issuance or redemption of checks, warrants or payments by other means for program purposes by the recipient. To the extent that the provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, payment methods of State agencies, instrumentalities, and fiscal agents should be consistent with CMIA Treasury-State Agreements or the CMIA default procedures codified at 31 CFR part 205, "Withdrawal of Cash from the Treasury for Advances under Federal Grant and Other Programs." (6) Written procedures for determining the reasonableness, allocability and allowability of costs in accordance with the provisions of the applicable Federal cost principles (see §32.27) and the terms and conditions of the award. (7) Accounting records including cost accounting records that are supported by source documentation. (c) 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. (d) The DoD Component may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest. (e) 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." § 32.22 Payment. (a) Payment methods shall minimize the time elapsing between the transfer of funds from the United States Treasury and the issuance or redemption of checks, warrants, or payment by other means by the recipients. Payment methods of State agencies or instrumentalities shall be consistent with Treasury-State agreements under the Cash Management Improvement Act (CMIA) (31 U.S.C. 3335 and 6503) or default procedures in 31 CFR part 205. (b) Recipients are to be paid in advance, provided they maintain or demonstrate the willingness to maintain: (1) Written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient; and (2) Financial management systems that meet the standards for fund control and accountability as established in §32.21. Cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. (c) Whenever possible, advances shall be consolidated to cover anticipated cash needs for all awards made by the DoD Component to the recipient. (1) Advance payment mechanisms include, but are not limited to, Treasury check and electronic funds transfer. (2) Advance payment mechanisms are subject to 31 CFR part 205. (3) Recipients shall be authorized to submit requests for advances and reimbursements at least monthly when electronic fund transfers are not used. (d) Requests for Treasury check advance payment shall be submitted on SF-270,3 "Request for Advance or Reimbursement," or other forms as may be authorized by OMB. This form is not to be used when Treasury check advance payments are made to the recipient automatically through the use of a predetermined payment schedule or if inconsistent with DoD procedures for electronic funds transfer. (e) Reimbursement is the preferred method when the requirements in paragraph (b) of this section cannot be met. DoD Components may also use this method on any construction agreement, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal assistance constitutes a minor portion of the project. (1) When the reimbursement method is used, the responsible DoD payment office generally makes payment within 30 calendar days after receipt of the billing by the office designated to re 3 See footnote 2 to §32.12(a). ceive the billing, unless the billing is improper (for further information about timeframes for payments, see 32 CFR 22.810(c)(3)(ii)). (2) Recipients shall be authorized to submit requests for reimbursement at least monthly when electronic funds transfers are not used. (f) If a recipient cannot meet the criteria for advance payments and the grants officer, in consultation with the program manager, has determined that reimbursement is not feasible because the recipient lacks sufficient working capital, the award may provide for cash on a working capital advance basis. Under this procedure, the award shall provide for advancing cash to the recipient to cover its estimated disbursement needs for an initial period generally geared to the awardee's disbursing cycle. Thereafter, the award shall provide for reimbursing the recipient for its actual cash disbursements. The working capital advance method of payment shall not be used for recipients unwilling or unable to provide timely advances to their subrecipient to meet the subrecipient's actual cash disbursements. (g) To the extent available, recipients shall disburse funds available from repayments to and interest earned on a revolving fund, program income, rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting additional cash payments. (h) Unless otherwise required by statute, grants officers shall not withhold payments for proper charges made by recipients at any time during the project period unless: (1) A recipient has failed to comply with the project objectives, the terms and conditions of the award, or Federal reporting requirements; or (2) The recipient or subrecipient is delinquent in a debt to the United States under OMB Circular A-129, "Managing Federal Credit Programs” (see definitions of "debt" and "delinquent debt," at 32 CFR 22.105). Under such conditions, the grants officer may, upon reasonable notice, inform the recipient that payments shall not be made for obligations incurred after a specified date until the conditions are corrected or the indebtedness to |