Authority - 2 CFR Part 200

2 CFR Part 200 (up to date as of 5/26/2023)
Uniform Administrative Requirements, Cost Principles, and Audit...

2 CFR Part 200 (2023-05-26)

This content is from the eCFR and is authoritative but unofficial.

Title 2 —Grants and Agreements
Subtitle A —Office of Management and Budget Guidance for Grants and Agreements
Chapter II —Office of Management and Budget Guidance
Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards
Subpart A Acronyms and Definitions
Acronyms
§ 200.0 Acronyms.
§ 200.1 Definitions.
Subpart B General Provisions
§ 200.100 Purpose.
§ 200.101 Applicability.
§ 200.102 Exceptions.
§ 200.103 Authorities.
§ 200.104 Supersession.
§ 200.105 Effect on other issuances.
§ 200.106 Agency implementation.
§ 200.107 OMB responsibilities.
§ 200.108 Inquiries.
§ 200.109 Review date.
§ 200.110 Effective/applicability date.
§ 200.111 English language.
§ 200.112 Conflict of interest.
§ 200.113 Mandatory disclosures.
Subpart C Pre-Federal Award Requirements and Contents of Federal Awards
§ 200.200 Purpose.
§ 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements,
and contracts.
§ 200.202 Program planning and design.
§ 200.203 Requirement to provide public notice of Federal financial assistance programs.
§ 200.204 Notices of funding opportunities.
§ 200.205 Federal awarding agency review of merit of proposals.
§ 200.206 Federal awarding agency review of risk posed by applicants.
§ 200.207 Standard application requirements.
§ 200.208 Specific conditions.
§ 200.209 Certifications and representations.
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§ 200.210
§ 200.211
§ 200.212
§ 200.213

Pre-award costs.
Information contained in a Federal award.
Public access to Federal award information.
Reporting a determination that a non-Federal entity is not qualified for a Federal
award.
§ 200.214 Suspension and debarment.
§ 200.215 Never contract with the enemy.
§ 200.216 Prohibition on certain telecommunications and video surveillance services or
equipment.
Subpart D Post Federal Award Requirements
§ 200.300
Statutory and national policy requirements.
§ 200.301
Performance measurement.
§ 200.302
Financial management.
§ 200.303
Internal controls.
§ 200.304
Bonds.
§ 200.305
Federal payment.
§ 200.306
Cost sharing or matching.
§ 200.307
Program income.
§ 200.308
Revision of budget and program plans.
§ 200.309
Modifications to Period of Performance.
Property Standards
§ 200.310 Insurance coverage.
§ 200.311 Real property.
§ 200.312 Federally-owned and exempt property.
§ 200.313 Equipment.
§ 200.314 Supplies.
§ 200.315 Intangible property.
§ 200.316 Property trust relationship.
Procurement Standards
§ 200.317 Procurements by states.
§ 200.318 General procurement standards.
§ 200.319 Competition.
§ 200.320 Methods of procurement to be followed.
§ 200.321 Contracting with small and minority businesses, women's business enterprises,
and labor surplus area firms.
§ 200.322 Domestic preferences for procurements.
§ 200.323 Procurement of recovered materials.
§ 200.324 Contract cost and price.
§ 200.325 Federal awarding agency or pass-through entity review.
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§ 200.326 Bonding requirements.
§ 200.327 Contract provisions.
Performance and Financial Monitoring and Reporting
§ 200.328 Financial reporting.
§ 200.329 Monitoring and reporting program performance.
§ 200.330 Reporting on real property.
Subrecipient Monitoring and Management
§ 200.331 Subrecipient and contractor determinations.
§ 200.332 Requirements for pass-through entities.
§ 200.333 Fixed amount subawards.
Record Retention and Access
§ 200.334 Retention requirements for records.
§ 200.335 Requests for transfer of records.
§ 200.336 Methods for collection, transmission, and storage of information.
§ 200.337 Access to records.
§ 200.338 Restrictions on public access to records.
Remedies for Noncompliance
§ 200.339 Remedies for noncompliance.
§ 200.340 Termination.
§ 200.341 Notification of termination requirement.
§ 200.342 Opportunities to object, hearings, and appeals.
§ 200.343 Effects of suspension and termination.
Closeout
§ 200.344 Closeout.
Post-Closeout Adjustments and Continuing Responsibilities
§ 200.345 Post-closeout adjustments and continuing responsibilities.
Collection of Amounts Due
§ 200.346 Collection of amounts due.
Subpart E Cost Principles
General Provisions
§ 200.400 Policy guide.
§ 200.401 Application.
Basic Considerations
§ 200.402 Composition of costs.
§ 200.403 Factors affecting allowability of costs.
§ 200.404 Reasonable costs.
§ 200.405 Allocable costs.
§ 200.406 Applicable credits.
§ 200.407 Prior written approval (prior approval).
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§ 200.408
§ 200.409
§ 200.410
§ 200.411

Limitation on allowance of costs.
Special considerations.
Collection of unallowable costs.
Adjustment of previously negotiated indirect (F&A) cost rates containing
unallowable costs.
Direct and Indirect (F&A) Costs
§ 200.412 Classification of costs.
§ 200.413 Direct costs.
§ 200.414 Indirect (F&A) costs.
§ 200.415 Required certifications.
Special Considerations for States, Local Governments and Indian
Tribes
§ 200.416 Cost allocation plans and indirect cost proposals.
§ 200.417 Interagency service.
Special Considerations for Institutions of Higher Education
§ 200.418 Costs incurred by states and local governments.
§ 200.419 Cost accounting standards and disclosure statement.
General Provisions for Selected Items of Cost
§ 200.420 Considerations for selected items of cost.
§ 200.421 Advertising and public relations.
§ 200.422 Advisory councils.
§ 200.423 Alcoholic beverages.
§ 200.424 Alumni/ae activities.
§ 200.425 Audit services.
§ 200.426 Bad debts.
§ 200.427 Bonding costs.
§ 200.428 Collections of improper payments.
§ 200.429 Commencement and convocation costs.
§ 200.430 Compensation—personal services.
§ 200.431 Compensation—fringe benefits.
§ 200.432 Conferences.
§ 200.433 Contingency provisions.
§ 200.434 Contributions and donations.
§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and
patent infringements.
§ 200.436 Depreciation.
§ 200.437 Employee health and welfare costs.
§ 200.438 Entertainment costs.
§ 200.439 Equipment and other capital expenditures.
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§ 200.440 Exchange rates.
§ 200.441 Fines, penalties, damages and other settlements.
§ 200.442 Fund raising and investment management costs.
§ 200.443 Gains and losses on disposition of depreciable assets.
§ 200.444 General costs of government.
§ 200.445 Goods or services for personal use.
§ 200.446 Idle facilities and idle capacity.
§ 200.447 Insurance and indemnification.
§ 200.448 Intellectual property.
§ 200.449 Interest.
§ 200.450 Lobbying.
§ 200.451 Losses on other awards or contracts.
§ 200.452 Maintenance and repair costs.
§ 200.453 Materials and supplies costs, including costs of computing devices.
§ 200.454 Memberships, subscriptions, and professional activity costs.
§ 200.455 Organization costs.
§ 200.456 Participant support costs.
§ 200.457 Plant and security costs.
§ 200.458 Pre-award costs.
§ 200.459 Professional service costs.
§ 200.460 Proposal costs.
§ 200.461 Publication and printing costs.
§ 200.462 Rearrangement and reconversion costs.
§ 200.463 Recruiting costs.
§ 200.464 Relocation costs of employees.
§ 200.465 Rental costs of real property and equipment.
§ 200.466 Scholarships and student aid costs.
§ 200.467 Selling and marketing costs.
§ 200.468 Specialized service facilities.
§ 200.469 Student activity costs.
§ 200.470 Taxes (including Value Added Tax).
§ 200.471 Telecommunication costs and video surveillance costs.
§ 200.472 Termination costs.
§ 200.473 Training and education costs.
§ 200.474 Transportation costs.
§ 200.475 Travel costs.
§ 200.476 Trustees.
Subpart F Audit Requirements

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General
§ 200.500 Purpose.
Audits
§ 200.501 Audit requirements.
§ 200.502 Basis for determining Federal awards expended.
§ 200.503 Relation to other audit requirements.
§ 200.504 Frequency of audits.
§ 200.505 Sanctions.
§ 200.506 Audit costs.
§ 200.507 Program-specific audits.
Auditees
§ 200.508 Auditee responsibilities.
§ 200.509 Auditor selection.
§ 200.510 Financial statements.
§ 200.511 Audit findings follow-up.
§ 200.512 Report submission.
Federal Agencies
§ 200.513 Responsibilities.
Auditors
§ 200.514 Scope of audit.
§ 200.515 Audit reporting.
§ 200.516 Audit findings.
§ 200.517 Audit documentation.
§ 200.518 Major program determination.
§ 200.519 Criteria for Federal program risk.
§ 200.520 Criteria for a low-risk auditee.
Management Decisions
§ 200.521 Management decision.
Appendix I to Part 200
Full Text of Notice of Funding Opportunity
Appendix II to Part 200
Contract Provisions for Non-Federal Entity Contracts Under
Federal Awards
Appendix III to Part 200
Indirect (F&A) Costs Identification and Assignment, and Rate
Determination for Institutions of Higher Education (IHEs)
Appendix IV to Part 200
Indirect (F&A) Costs Identification and Assignment, and Rate
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Determination for Nonprofit Organizations
Appendix V to Part 200
State/Local Governmentwide Central Service Cost Allocation
Plans
Appendix VI to Part 200
Public Assistance Cost Allocation Plans
Appendix VII to Part 200
States and Local Government and Indian Tribe Indirect Cost
Proposals
Appendix VIII to Part 200
Nonprofit Organizations Exempted From Subpart E of Part 200
Appendix IX to Part 200
Hospital Cost Principles
Appendix X to Part 200
Data Collection Form (Form SF–SAC)
Appendix XI to Part 200
Compliance Supplement
Appendix XII to Part 200
Award Term and Condition for Recipient Integrity and
Performance Matters

PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST
PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS
Authority: 31 U.S.C. 503
Source: 78 FR 78608, Dec. 26, 2013, unless otherwise noted.

Subpart A—Acronyms and Definitions
ACRONYMS
§ 200.0 Acronyms.

Acronym Term
CAS Cost Accounting Standards

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CFR Code of Federal Regulations
CMIA Cash Management Improvement Act
COG Councils Of Governments
COSO Committee of Sponsoring Organizations of the Treadway Commission
EPA Environmental Protection Agency
ERISA Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301–1461)
EUI Energy Usage Index
F&A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification Number
FAPIIS Federal Awardee Performance and Integrity Information System
FAR Federal Acquisition Regulation
FFATA Federal Funding Accountability and Transparency Act of 2006 or Transparency Act—Public Law 109–282, as
amended by section 6202(a) of Public Law 110–252 (31 U.S.C. 6101)
FICA Federal Insurance Contributions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full-time equivalent
GAAP Generally Accepted Accounting Principles
GAGAS Generally Accepted Government Auditing Standards
GAO Government Accountability Office
GOCO Government owned, contractor operated
GSA General Services Administration
IBS Institutional Base Salary
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IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self-Determination and Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
NFE Non-Federal Entity
OMB Office of Management and Budget
PII Personally Identifiable Information
PMS Payment Management System
PRHP Post-retirement Health Plans
PTE Pass-through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SFA Student Financial Aid
SNAP Supplemental Nutrition Assistance Program
SPOC Single Point of Contact
TANF Temporary Assistance for Needy Families
TFM Treasury Financial Manual
U.S.C. United States Code
VAT Value Added Tax
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75880, Dec. 19, 2014; 80 FR 43308, July 22, 2015; 85 FR 49529, Aug. 13, 2020]

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§ 200.1 Definitions.
These are the definitions for terms used in this part. Different definitions may be found in Federal statutes or
regulations that apply more specifically to particular programs or activities. These definitions could be
supplemented by additional instructional information provided in governmentwide standard information collections.
For purposes of this part, the following definitions apply:
Acquisition cost means the cost of the asset including the cost to ready the asset for its intended use.
Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the
cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable
for the purpose for which it is acquired. Acquisition costs for software includes those development costs
capitalized in accordance with generally accepted accounting principles (GAAP). Ancillary charges, such
as taxes, duty, protective in transit insurance, freight, and installation may be included in or excluded from
the acquisition cost in accordance with the non-Federal entity's regular accounting practices.
Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any
appropriate payment mechanism, including a predetermined payment schedule, before the non-Federal
entity disburses the funds for program purposes.
Allocation means the process of assigning a cost, or a group of costs, to one or more cost objective(s), in
reasonable proportion to the benefit provided or other equitable relationship. The process may entail
assigning a cost(s) directly to a final cost objective or through one or more intermediate cost objectives.
Assistance listings refers to the publicly available listing of Federal assistance programs managed and
administered by the General Services Administration, formerly known as the Catalog of Federal Domestic
Assistance (CFDA).
Assistance listing number means a unique number assigned to identify a Federal Assistance Listings, formerly
known as the CFDA Number.
Assistance listing program title means the title that corresponds to the Federal Assistance Listings Number,
formerly known as the CFDA program title.
Audit finding means deficiencies which the auditor is required by § 200.516(a) to report in the schedule of
findings and questioned costs.
Auditee means any non-Federal entity that expends Federal awards which must be audited under subpart F of
this part.
Auditor means an auditor who is a public accountant or a Federal, State, local government, or Indian tribe audit
organization, which meets the general standards specified for external auditors in generally accepted
government auditing standards (GAGAS). The term auditor does not include internal auditors of nonprofit
organizations.
Budget means the financial plan for the Federal award that the Federal awarding agency or pass-through entity
approves during the Federal award process or in subsequent amendments to the Federal award. It may
include the Federal and non-Federal share or only the Federal share, as determined by the Federal
awarding agency or pass-through entity.
Budget period means the time interval from the start date of a funded portion of an award to the end date of
that funded portion during which recipients are authorized to expend the funds awarded, including any
funds carried forward or other revisions pursuant to § 200.308.
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2 CFR 200.1 “Capital assets”

Capital assets means:
(1) Tangible or intangible assets used in operations having a useful life of more than one year which are
capitalized in accordance with GAAP. Capital assets include:
(i)

Land, buildings (facilities), equipment, and intellectual property (including software) whether
acquired by purchase, construction, manufacture, exchange, or through a lease accounted for
as financed purchase under Government Accounting Standards Board (GASB) standards or a
finance lease under Financial Accounting Standards Board (FASB) standards; and

(ii) Additions, improvements, modifications, replacements, rearrangements, reinstallations,
renovations or alterations to capital assets that materially increase their value or useful life (not
ordinary repairs and maintenance).
(2) For purpose of this part, capital assets do not include intangible right-to-use assets (per GASB) and
right-to-use operating lease assets (per FASB). For example, assets capitalized that recognize a
lessee's right to control the use of property and/or equipment for a period of time under a lease
contract. See also § 200.465.
Capital expenditures means expenditures to acquire capital assets or expenditures to make additions,
improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to
capital assets that materially increase their value or useful life.
Central service cost allocation plan means the documentation identifying, accumulating, and allocating or
developing billing rates based on the allowable costs of services provided by a State or local government
or Indian tribe on a centralized basis to its departments and agencies. The costs of these services may be
allocated or billed to users.
Claim means, depending on the context, either:
(1) A written demand or written assertion by one of the parties to a Federal award seeking as a matter of
right:
(i)

The payment of money in a sum certain;

(ii) The adjustment or interpretation of the terms and conditions of the Federal award; or
(iii) Other relief arising under or relating to a Federal award.
(2) A request for payment that is not in dispute when submitted.
Class of Federal awards means a group of Federal awards either awarded under a specific program or group of
programs or to a specific type of non-Federal entity or group of non-Federal entities to which specific
provisions or exceptions may apply.
Closeout means the process by which the Federal awarding agency or pass-through entity determines that all
applicable administrative actions and all required work of the Federal award have been completed and
takes actions as described in § 200.344.
Cluster of programs means a grouping of closely related programs that share common compliance
requirements. The types of clusters of programs are research and development (R&D), student financial
aid (SFA), and other clusters. “Other clusters” are as defined by OMB in the compliance supplement or as
designated by a State for Federal awards the State provides to its subrecipients that meet the definition of
a cluster of programs. When designating an “other cluster,” a State must identify the Federal awards
included in the cluster and advise the subrecipients of compliance requirements applicable to the cluster,
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2 CFR 200.1 “Cognizant agency for audit”

consistent with § 200.332(a). A cluster of programs must be considered as one program for determining
major programs, as described in § 200.518, and, with the exception of R&D as described in § 200.501(c),
whether a program-specific audit may be elected.
Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in §
200.513(a). The cognizant agency for audit is not necessarily the same as the cognizant agency for
indirect costs. A list of cognizant agencies for audit can be found on the Federal Audit Clearinghouse
(FAC) website.
Cognizant agency for indirect costs means the Federal agency responsible for reviewing, negotiating, and
approving cost allocation plans or indirect cost proposals developed under this part on behalf of all
Federal agencies. The cognizant agency for indirect cost is not necessarily the same as the cognizant
agency for audit. For assignments of cognizant agencies see the following:
(1) For Institutions of Higher Education (IHEs): Appendix III to this part, paragraph C.11.
(2) For nonprofit organizations: Appendix IV to this part, paragraph C.2.a.
(3) For State and local governments: Appendix V to this part, paragraph F.1.
(4) For Indian tribes: Appendix VII to this part, paragraph D.1.
Compliance supplement means an annually updated authoritative source for auditors that serves to identify
existing important compliance requirements that the Federal Government expects to be considered as
part of an audit. Auditors use it to understand the Federal program's objectives, procedures, and
compliance requirements, as well as audit objectives and suggested audit procedures for determining
compliance with the relevant Federal program.
Computing devices means machines used to acquire, store, analyze, process, and publish data and other
information electronically, including accessories (or “peripherals”) for printing, transmitting and receiving,
or storing electronic information. See also the definitions of supplies and information technology systems
in this section.
Contract means, for the purpose of Federal financial assistance, a legal instrument by which a recipient or
subrecipient purchases property or services needed to carry out the project or program under a Federal
award. For additional information on subrecipient and contractor determinations, see § 200.331. See also
the definition of subaward in this section.
Contractor means an entity that receives a contract as defined in this section.
Cooperative agreement means a legal instrument of financial assistance between a Federal awarding agency
and a recipient or a pass-through entity and a subrecipient that, consistent with 31 U.S.C. 6302–6305:
(1) Is used to enter into a relationship the principal purpose of which is to transfer anything of value to
carry out a public purpose authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not
to acquire property or services for the Federal Government or pass-through entity's direct benefit or
use;
(2) Is distinguished from a grant in that it provides for substantial involvement of the Federal awarding
agency in carrying out the activity contemplated by the Federal award.
(3) The term does not include:
(i)

A cooperative research and development agreement as defined in 15 U.S.C. 3710a; or

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2 CFR 200.1 “Cooperative agreement” (3)(ii)

(ii) An agreement that provides only:
(A) Direct United States Government cash assistance to an individual;
(B) A subsidy;
(C) A loan;
(D) A loan guarantee; or
(E) Insurance.
Cooperative audit resolution means the use of audit follow-up techniques which promote prompt corrective
action by improving communication, fostering collaboration, promoting trust, and developing an
understanding between the Federal agency and the non-Federal entity. This approach is based upon:
(1) A strong commitment by Federal agency and non-Federal entity leadership to program integrity;
(2) Federal agencies strengthening partnerships and working cooperatively with non-Federal entities and
their auditors; and non-Federal entities and their auditors working cooperatively with Federal
agencies;
(3) A focus on current conditions and corrective action going forward;
(4) Federal agencies offering appropriate relief for past noncompliance when audits show prompt
corrective action has occurred; and
(5) Federal agency leadership sending a clear message that continued failure to correct conditions
identified by audits which are likely to cause improper payments, fraud, waste, or abuse is
unacceptable and will result in sanctions.
Corrective action means action taken by the auditee that:
(1) Corrects identified deficiencies;
(2) Produces recommended improvements; or
(3) Demonstrates that audit findings are either invalid or do not warrant auditee action.
Cost allocation plan means central service cost allocation plan or public assistance cost allocation plan.
Cost objective means a program, function, activity, award, organizational subdivision, contract, or work unit for
which cost data are desired and for which provision is made to accumulate and measure the cost of
processes, products, jobs, capital projects, etc. A cost objective may be a major function of the nonFederal entity, a particular service or project, a Federal award, or an indirect (Facilities & Administrative
(F&A)) cost activity, as described in subpart E of this part. See also the definitions of final cost objective
and intermediate cost objective in this section.
Cost sharing or matching means the portion of project costs not paid by Federal funds or contributions (unless
otherwise authorized by Federal statute). See also § 200.306.
Cross-cutting audit finding means an audit finding where the same underlying condition or issue affects all
Federal awards (including Federal awards of more than one Federal awarding agency or pass-through
entity).

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2 CFR 200.1 “Disallowed costs”

Disallowed costs means those charges to a Federal award that the Federal awarding agency or pass-through
entity determines to be unallowable, in accordance with the applicable Federal statutes, regulations, or the
terms and conditions of the Federal award.
Discretionary award means an award in which the Federal awarding agency, in keeping with specific statutory
authority that enables the agency to exercise judgment (“discretion”), selects the recipient and/or the
amount of Federal funding awarded through a competitive process or based on merit of proposals. A
discretionary award may be selected on a non-competitive basis, as appropriate.
Equipment means tangible personal property (including information technology systems) having a useful life of
more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the
capitalization level established by the non-Federal entity for financial statement purposes, or $5,000. See
also the definitions of capital assets, computing devices, general purpose equipment, information
technology systems, special purpose equipment, and supplies in this section.
Expenditures means charges made by a non-Federal entity to a project or program for which a Federal award
was received.
(1) The charges may be reported on a cash or accrual basis, as long as the methodology is disclosed
and is consistently applied.
(2) For reports prepared on a cash basis, expenditures are the sum of:
(i)

Cash disbursements for direct charges for property and services;

(ii) The amount of indirect expense charged;
(iii) The value of third-party in-kind contributions applied; and
(iv) The amount of cash advance payments and payments made to subrecipients.
(3) For reports prepared on an accrual basis, expenditures are the sum of:
(i)

Cash disbursements for direct charges for property and services;

(ii) The amount of indirect expense incurred;
(iii) The value of third-party in-kind contributions applied; and
(iv) The net increase or decrease in the amounts owed by the non-Federal entity for:
(A) Goods and other property received;
(B) Services performed by employees, contractors, subrecipients, and other payees; and
(C) Programs for which no current services or performance are required such as annuities,
insurance claims, or other benefit payments.
Federal agency means an “agency” as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f).
Federal Audit Clearinghouse (FAC) means the clearinghouse designated by OMB as the repository of record
where non-Federal entities are required to transmit the information required by subpart F of this part.
Federal award has the meaning, depending on the context, in either paragraph (1) or (2) of this definition:
(1)

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(i)

2 CFR 200.1 “Federal award” (1)(i)

The Federal financial assistance that a recipient receives directly from a Federal awarding
agency or indirectly from a pass-through entity, as described in § 200.101; or

(ii) The cost-reimbursement contract under the Federal Acquisition Regulations that a non-Federal
entity receives directly from a Federal awarding agency or indirectly from a pass-through entity,
as described in § 200.101.
(2) The instrument setting forth the terms and conditions. The instrument is the grant agreement,
cooperative agreement, other agreement for assistance covered in paragraph (2) of the definition of
Federal financial assistance in this section, or the cost-reimbursement contract awarded under the
Federal Acquisition Regulations.
(3) Federal award does not include other contracts that a Federal agency uses to buy goods or services
from a contractor or a contract to operate Federal Government owned, contractor operated facilities
(GOCOs).
(4) See also definitions of Federal financial assistance, grant agreement, and cooperative agreement.
Federal award date means the date when the Federal award is signed by the authorized official of the Federal
awarding agency.
Federal awarding agency means the Federal agency that provides a Federal award directly to a non-Federal
entity.
Federal financial assistance means
(1) Assistance that non-Federal entities receive or administer in the form of:
(i)

Grants;

(ii) Cooperative agreements;
(iii) Non-cash contributions or donations of property (including donated surplus property);
(iv) Direct appropriations;
(v) Food commodities; and
(vi) Other financial assistance (except assistance listed in paragraph (2) of this definition).
(2) For § 200.203 and subpart F of this part, Federal financial assistance also includes assistance that
non-Federal entities receive or administer in the form of:
(i)

Loans;

(ii) Loan Guarantees;
(iii) Interest subsidies; and
(iv) Insurance.
(3) For § 200.216, Federal financial assistance includes assistance that non-Federal entities receive or
administer in the form of:
(i)

Grants;

(ii) Cooperative agreements;
(iii) Loans; and
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2 CFR 200.1 “Federal financial assistance” (3)(iv)

(iv) Loan Guarantees.
(4) Federal financial assistance does not include amounts received as reimbursement for services
rendered to individuals as described in § 200.502(h) and (i).
Federal interest means, for purposes of § 200.330 or when used in connection with the acquisition or
improvement of real property, equipment, or supplies under a Federal award, the dollar amount that is the
product of the:
(1) The percentage of Federal participation in the total cost of the real property, equipment, or supplies;
and
(2) Current fair market value of the property, improvements, or both, to the extent the costs of acquiring
or improving the property were included as project costs.
Federal program means:
(1) All Federal awards which are assigned a single Assistance Listings Number.
(2) When no Assistance Listings Number is assigned, all Federal awards from the same agency made
for the same purpose must be combined and considered one program.
(3) Notwithstanding paragraphs (1) and (2) of this definition, a cluster of programs. The types of
clusters of programs are:
(i)

Research and development (R&D);

(ii) Student financial aid (SFA); and
(iii) “Other clusters,” as described in the definition of cluster of programs in this section.
Federal share means the portion of the Federal award costs that are paid using Federal funds.
Final cost objective means a cost objective which has allocated to it both direct and indirect costs and, in the
non-Federal entity's accumulation system, is one of the final accumulation points, such as a particular
award, internal project, or other direct activity of a non-Federal entity. See also the definitions of cost
objective and intermediate cost objective in this section.
Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means
orders placed for property and services, contracts and subawards made, and similar transactions that
require payment.
Fixed amount awards means a type of grant or cooperative agreement under which the Federal awarding agency
or pass-through entity provides a specific level of support without regard to actual costs incurred under
the Federal award. This type of Federal award reduces some of the administrative burden and recordkeeping requirements for both the non-Federal entity and Federal awarding agency or pass-through entity.
Accountability is based primarily on performance and results. See §§ 200.102(c), 200.201(b), and
200.333.
Foreign organization means an entity that is:
(1) A public or private organization located in a country other than the United States and its territories
that is subject to the laws of the country in which it is located, irrespective of the citizenship of
project staff or place of performance;

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2 CFR 200.1 “Foreign organization” (2)

(2) A private nongovernmental organization located in a country other than the United States that
solicits and receives cash contributions from the general public;
(3) A charitable organization located in a country other than the United States that is nonprofit and tax
exempt under the laws of its country of domicile and operation, and is not a university, college,
accredited degree-granting institution of education, private foundation, hospital, organization
engaged exclusively in research or scientific activities, church, synagogue, mosque or other similar
entities organized primarily for religious purposes; or
(4) An organization located in a country other than the United States not recognized as a foreign public
entity.
Foreign public entity means:
(1) A foreign government or foreign governmental entity;
(2) A public international organization, which is an organization entitled to enjoy privileges, exemptions,
and immunities as an international organization under the International Organizations Immunities
Act (22 U.S.C. 288–288f);
(3) An entity owned (in whole or in part) or controlled by a foreign government; or
(4) Any other entity consisting wholly or partially of one or more foreign governments or foreign
governmental entities.
General purpose equipment means equipment which is not limited to research, medical, scientific or other
technical activities. Examples include office equipment and furnishings, modular offices, telephone
networks, information technology equipment and systems, air conditioning equipment, reproduction and
printing equipment, and motor vehicles. See also the definitions of equipment and special purpose
equipment in this section.
Generally accepted accounting principles (GAAP) has the meaning specified in accounting standards issued by
the GASB and the FASB.
Generally accepted government auditing standards (GAGAS), also known as the Yellow Book, means generally
accepted government auditing standards issued by the Comptroller General of the United States, which
are applicable to financial audits.
Grant agreement means a legal instrument of financial assistance between a Federal awarding agency or passthrough entity and a non-Federal entity that, consistent with 31 U.S.C. 6302, 6304:
(1) Is used to enter into a relationship the principal purpose of which is to transfer anything of value to
carry out a public purpose authorized by a law of the United States (see 31 U.S.C. 6101(3)); and not
to acquire property or services for the Federal awarding agency or pass-through entity's direct
benefit or use;
(2) Is distinguished from a cooperative agreement in that it does not provide for substantial involvement
of the Federal awarding agency in carrying out the activity contemplated by the Federal award.
(3) Does not include an agreement that provides only:
(i)

Direct United States Government cash assistance to an individual;

(ii) A subsidy;
(iii) A loan;
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2 CFR 200.1 “Highest level owner”

(vi) A loan guarantee; or
(v) Insurance.
Highest level owner means the entity that owns or controls an immediate owner of the offeror, or that owns or
controls one or more entities that control an immediate owner of the offeror. No entity owns or exercises
control of the highest-level owner as defined in the Federal Acquisition Regulations (FAR) (48 CFR
52.204–17).
Hospital means a facility licensed as a hospital under the law of any state or a facility operated as a hospital by
the United States, a state, or a subdivision of a state.
Improper payment means:
(1) Any payment that should not have been made or that was made in an incorrect amount under
statutory, contractual, administrative, or other legally applicable requirements.
(i)

Incorrect amounts are overpayments or underpayments that are made to eligible recipients
(including inappropriate denials of payment or service, any payment that does not account for
credit for applicable discounts, payments that are for an incorrect amount, and duplicate
payments). An improper payment also includes any payment that was made to an ineligible
recipient or for an ineligible good or service, or payments for goods or services not received
(except for such payments authorized by law).

Note 1 to paragraph (1)(i) of this definition. Applicable discounts are only those discounts where it is both
advantageous and within the agency's control to claim them.
(ii) When an agency's review is unable to discern whether a payment was proper as a result of
insufficient or lack of documentation, this payment should also be considered an improper
payment. When establishing documentation requirements for payments, agencies should
ensure that all documentation requirements are necessary and should refrain from imposing
additional burdensome documentation requirements.
(iii) Interest or other fees that may result from an underpayment by an agency are not considered an
improper payment if the interest was paid correctly. These payments are generally separate
transactions and may be necessary under certain statutory, contractual, administrative, or other
legally applicable requirements.
(iv) A “questioned cost” (as defined in this section) should not be considered an improper payment
until the transaction has been completely reviewed and is confirmed to be improper.
(v) The term “payment” in this definition means any disbursement or transfer of Federal funds
(including a commitment for future payment, such as cash, securities, loans, loan guarantees,
and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee,
that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or
other organization administering a Federal program or activity.
(vi) The term “payment” includes disbursements made pursuant to prime contracts awarded under
the Federal Acquisition Regulation and Federal awards subject to this part that are expended by
recipients.
(2) See definition of improper payment in OMB Circular A–123 appendix C, part I A (1) “What is an
improper payment?” Questioned costs, including those identified in audits, are not an improper
payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 appendix C.
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2 CFR 200.1 “Indian tribe”

Indian tribe means any Indian tribe, band, nation, or other organized group or community, including any Alaska
Native village or regional or village corporation as defined in or established pursuant to the Alaska Native
Claims Settlement Act (43 U.S.C. Chapter 33), which is recognized as eligible for the special programs
and services provided by the United States to Indians because of their status as Indians (25 U.S.C.
450b(e)). See annually published Bureau of Indian Affairs list of Indian Entities Recognized and Eligible to
Receive Services.
Institutions of Higher Education (IHEs) is defined at 20 U.S.C. 1001.
Indirect (facilities & administrative (F&A)) costs means those costs incurred for a common or joint purpose
benefitting more than one cost objective, and not readily assignable to the cost objectives specifically
benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of
indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of
indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases
that will produce an equitable result in consideration of relative benefits derived.
Indirect cost rate proposal means the documentation prepared by a non-Federal entity to substantiate its
request for the establishment of an indirect cost rate as described in appendices III through VII and
appendix IX to this part.
Information technology systems means computing devices, ancillary equipment, software, firmware, and similar
procedures, services (including support services), and related resources. See also the definitions of
computing devices and equipment in this section.
Intangible property means property having no physical existence, such as trademarks, copyrights, patents and
patent applications and property, such as loans, notes and other debt instruments, lease agreements,
stock and other instruments of property ownership (whether the property is tangible or intangible).
Intermediate cost objective means a cost objective that is used to accumulate indirect costs or service center
costs that are subsequently allocated to one or more indirect cost pools or final cost objectives. See also
the definitions of cost objective and final cost objective in this section.
Internal controls for non-Federal entities means:
(1) Processes designed and implemented by non-Federal entities to provide reasonable assurance
regarding the achievement of objectives in the following categories:
(i)

Effectiveness and efficiency of operations;

(ii) Reliability of reporting for internal and external use; and
(iii) Compliance with applicable laws and regulations.
(2) Federal awarding agencies are required to follow internal control compliance requirements in OMB
Circular No. A–123, Management's Responsibility for Enterprise Risk Management and Internal
Control.
Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity, except as used
in the definition of program income in this section.
(1) The term “direct loan” means a disbursement of funds by the Federal Government to a non-Federal
borrower under a contract that requires the repayment of such funds with or without interest. The
term includes the purchase of, or participation in, a loan made by another lender and financing

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2 CFR 200.1 “Loan” (2)

arrangements that defer payment for more than 90 days, including the sale of a Federal Government
asset on credit terms. The term does not include the acquisition of a federally guaranteed loan in
satisfaction of default claims or the price support loans of the Commodity Credit Corporation.
(2) The term “direct loan obligation” means a binding agreement by a Federal awarding agency to make
a direct loan when specified conditions are fulfilled by the borrower.
(3) The term “loan guarantee” means any Federal Government guarantee, insurance, or other pledge with
respect to the payment of all or a part of the principal or interest on any debt obligation of a nonFederal borrower to a non-Federal lender, but does not include the insurance of deposits, shares, or
other withdrawable accounts in financial institutions.
(4) The term “loan guarantee commitment” means a binding agreement by a Federal awarding agency to
make a loan guarantee when specified conditions are fulfilled by the borrower, the lender, or any
other party to the guarantee agreement.
Local government means any unit of government within a state, including a:
(1) County;
(2) Borough;
(3) Municipality;
(4) City;
(5) Town;
(6) Township;
(7) Parish;
(8) Local public authority, including any public housing agency under the United States Housing Act of
1937;
(9) Special district;
(10) School district;
(11) Intrastate district;
(12) Council of governments, whether or not incorporated as a nonprofit corporation under State law; and
(13) Any other agency or instrumentality of a multi-, regional, or intra-State or local government.
Major program means a Federal program determined by the auditor to be a major program in accordance with §
200.518 or a program identified as a major program by a Federal awarding agency or pass-through entity
in accordance with § 200.503(e).
Management decision means the Federal awarding agency's or pass-through entity's written determination,
provided to the auditee, of the adequacy of the auditee's proposed corrective actions to address the
findings, based on its evaluation of the audit findings and proposed corrective actions.
Micro-purchase means a purchase of supplies or services, the aggregate amount of which does not exceed the
micro-purchase threshold. Micro-purchases comprise a subset of a non-Federal entity's small purchases
as defined in § 200.320.

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2 CFR 200.1 “Micro-purchase threshold”

Micro-purchase threshold means the dollar amount at or below which a non-Federal entity may purchase
property or services using micro-purchase procedures (see § 200.320). Generally, the micro-purchase
threshold for procurement activities administered under Federal awards is not to exceed the amount set
by the FAR at 48 CFR part 2, subpart 2.1, unless a higher threshold is requested by the non-Federal entity
and approved by the cognizant agency for indirect costs.
Modified Total Direct Cost (MTDC) means all direct salaries and wages, applicable fringe benefits, materials and
supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of
performance of the subawards under the award). MTDC excludes equipment, capital expenditures,
charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support
costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when
necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the
cognizant agency for indirect costs.
Non-discretionary award means an award made by the Federal awarding agency to specific recipients in
accordance with statutory, eligibility and compliance requirements, such that in keeping with specific
statutory authority the agency has no ability to exercise judgement (“discretion”). A non-discretionary
award amount could be determined specifically or by formula.
Non-Federal entity (NFE) means a State, local government, Indian tribe, Institution of Higher Education (IHE), or
nonprofit organization that carries out a Federal award as a recipient or subrecipient.
Nonprofit organization means any corporation, trust, association, cooperative, or other organization, not
including IHEs, that:
(1) Is operated primarily for scientific, educational, service, charitable, or similar purposes in the public
interest;
(2) Is not organized primarily for profit; and
(3) Uses net proceeds to maintain, improve, or expand the operations of the organization.
Notice of funding opportunity means a formal announcement of the availability of Federal funding through a
financial assistance program from a Federal awarding agency. The notice of funding opportunity provides
information on the award, who is eligible to apply, the evaluation criteria for selection of an awardee,
required components of an application, and how to submit the application. The notice of funding
opportunity is any paper or electronic issuance that an agency uses to announce a funding opportunity,
whether it is called a “program announcement,” “notice of funding availability,” “broad agency
announcement,” “research announcement,” “solicitation,” or some other term.
Office of Management and Budget (OMB) means the Executive Office of the President, Office of Management
and Budget.
Oversight agency for audit means the Federal awarding agency that provides the predominant amount of
funding directly (direct funding) (as listed on the schedule of expenditures of Federal awards, see §
200.510(b)) to a non-Federal entity unless OMB designates a specific cognizant agency for audit. When
the direct funding represents less than 25 percent of the total Federal expenditures (as direct and subawards) by the non-Federal entity, then the Federal agency with the predominant amount of total funding
is the designated oversight agency for audit. When there is no direct funding, the Federal awarding agency
which is the predominant source of pass-through funding must assume the oversight responsibilities. The
duties of the oversight agency for audit and the process for any reassignments are described in §
200.513(b).
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2 CFR 200.1 “Participant support costs”

Participant support costs means direct costs for items such as stipends or subsistence allowances, travel
allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in
connection with conferences, or training projects.
Pass-through entity (PTE) means a non-Federal entity that provides a subaward to a subrecipient to carry out
part of a Federal program.
Performance goal means a target level of performance expressed as a tangible, measurable objective, against
which actual achievement can be compared, including a goal expressed as a quantitative standard, value,
or rate. In some instances (e.g., discretionary research awards), this may be limited to the requirement to
submit technical performance reports (to be evaluated in accordance with agency policy).
Period of performance means the total estimated time interval between the start of an initial Federal award and
the planned end date, which may include one or more funded portions, or budget periods. Identification of
the period of performance in the Federal award per § 200.211(b)(5) does not commit the awarding
agency to fund the award beyond the currently approved budget period.
Personal property means property other than real property. It may be tangible, having physical existence, or
intangible.
Personally Identifiable Information (PII) means information that can be used to distinguish or trace an
individual's identity, either alone or when combined with other personal or identifying information that is
linked or linkable to a specific individual. Some information that is considered to be PII is available in
public sources such as telephone books, public websites, and university listings. This type of information
is considered to be Public PII and includes, for example, first and last name, address, work telephone
number, email address, home telephone number, and general educational credentials. The definition of PII
is not anchored to any single category of information or technology. Rather, it requires a case-by-case
assessment of the specific risk that an individual can be identified. Non-PII can become PII whenever
additional information is made publicly available, in any medium and from any source, that, when
combined with other available information, could be used to identify an individual.
Program income means gross income earned by the non-Federal entity that is directly generated by a supported
activity or earned as a result of the Federal award during the period of performance except as provided in
§ 200.307(f). (See the definition of period of performance in this section.) Program income includes but is
not limited to income from fees for services performed, the use or rental or real or personal property
acquired under Federal awards, the sale of commodities or items fabricated under a Federal award,
license fees and royalties on patents and copyrights, and principal and interest on loans made with
Federal award funds. Interest earned on advances of Federal funds is not program income. Except as
otherwise provided in Federal statutes, regulations, or the terms and conditions of the Federal award,
program income does not include rebates, credits, discounts, and interest earned on any of them. See
also § 200.407. See also 35 U.S.C. 200–212 “Disposition of Rights in Educational Awards” applies to
inventions made under Federal awards.
Project cost means total allowable costs incurred under a Federal award and all required cost sharing and
voluntary committed cost sharing, including third-party contributions.
Property means real property or personal property. See also the definitions of real property and personal property
in this section.
Protected Personally Identifiable Information (Protected PII) means an individual's first name or first initial and
last name in combination with any one or more of types of information, including, but not limited to, social
security number, passport number, credit card numbers, clearances, bank numbers, biometrics, date and
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2 CFR 200.1 “Questioned cost”

place of birth, mother's maiden name, criminal, medical and financial records, educational transcripts.
This does not include PII that is required by law to be disclosed. See also the definition of Personally
Identifiable Information (PII) in this section.
Questioned cost means a cost that is questioned by the auditor because of an audit finding:
(1) Which resulted from a violation or possible violation of a statute, regulation, or the terms and
conditions of a Federal award, including for funds used to match Federal funds;
(2) Where the costs, at the time of the audit, are not supported by adequate documentation; or
(3) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would
take in the circumstances.
(4) Questioned costs are not an improper payment until reviewed and confirmed to be improper as
defined in OMB Circular A–123 appendix C. (See also the definition of Improper payment in this
section).
Real property means land, including land improvements, structures and appurtenances thereto, but excludes
moveable machinery and equipment.
Recipient means an entity, usually but not limited to non-Federal entities that receives a Federal award directly
from a Federal awarding agency. The term recipient does not include subrecipients or individuals that are
beneficiaries of the award.
Renewal award means an award made subsequent to an expiring Federal award for which the start date is
contiguous with, or closely follows, the end of the expiring Federal award. A renewal award's start date
will begin a distinct period of performance.
Research and Development (R&D) means all research activities, both basic and applied, and all development
activities that are performed by non-Federal entities. The term research also includes activities involving
the training of individuals in research techniques where such activities utilize the same facilities as other
research and development activities and where such activities are not included in the instruction function.
“Research” is defined as a systematic study directed toward fuller scientific knowledge or understanding
of the subject studied. “Development” is the systematic use of knowledge and understanding gained from
research directed toward the production of useful materials, devices, systems, or methods, including
design and development of prototypes and processes.
Simplified acquisition threshold means the dollar amount below which a non-Federal entity may purchase
property or services using small purchase methods (see § 200.320). Non-Federal entities adopt small
purchase procedures in order to expedite the purchase of items at or below the simplified acquisition
threshold. The simplified acquisition threshold for procurement activities administered under Federal
awards is set by the FAR at 48 CFR part 2, subpart 2.1. The non-Federal entity is responsible for
determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of
risk, and its documented procurement procedures. However, in no circumstances can this threshold
exceed the dollar value established in the FAR (48 CFR part 2, subpart 2.1) for the simplified acquisition
threshold. Recipients should determine if local government laws on purchasing apply.
Special purpose equipment means equipment which is used only for research, medical, scientific, or other
technical activities. Examples of special purpose equipment include microscopes, x-ray machines,
surgical instruments, and spectrometers. See also the definitions of equipment and general purpose
equipment in this section.

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2 CFR 200.1 “State”

State means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, U.S.
Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any
agency or instrumentality thereof exclusive of local governments.
Student Financial Aid (SFA) means Federal awards under those programs of general student assistance, such as
those authorized by Title IV of the Higher Education Act of 1965, as amended, (20 U.S.C. 1070–1099d),
which are administered by the U.S. Department of Education, and similar programs provided by other
Federal agencies. It does not include Federal awards under programs that provide fellowships or similar
Federal awards to students on a competitive basis, or for specified studies or research.
Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out
part of a Federal award received by the pass-through entity. It does not include payments to a contractor
or payments to an individual that is a beneficiary of a Federal program. A subaward may be provided
through any form of legal agreement, including an agreement that the pass-through entity considers a
contract.
Subrecipient means an entity, usually but not limited to non-Federal entities, that receives a subaward from a
pass-through entity to carry out part of a Federal award; but does not include an individual that is a
beneficiary of such award. A subrecipient may also be a recipient of other Federal awards directly from a
Federal awarding agency.
Subsidiary means an entity in which more than 50 percent of the entity is owned or controlled directly by a
parent corporation or through another subsidiary of a parent corporation.
Supplies means all tangible personal property other than those described in the definition of equipment in this
section. A computing device is a supply if the acquisition cost is less than the lesser of the capitalization
level established by the non-Federal entity for financial statement purposes or $5,000, regardless of the
length of its useful life. See also the definitions of computing devices and equipment in this section.
Telecommunications cost means the cost of using communication and telephony technologies such as mobile
phones, land lines, and internet.
Termination means the ending of a Federal award, in whole or in part at any time prior to the planned end of
period of performance. A lack of available funds is not a termination.
Third-party in-kind contributions means the value of non-cash contributions (i.e., property or services) that—
(1) Benefit a federally-assisted project or program; and
(2) Are contributed by non-Federal third parties, without charge, to a non-Federal entity under a Federal
award.
Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations
incurred by the non-Federal entity that have not been paid (liquidated). For reports prepared on an accrual
expenditure basis, these are financial obligations incurred by the non-Federal entity for which an
expenditure has not been recorded.
Unobligated balance means the amount of funds under a Federal award that the non-Federal entity has not
obligated. The amount is computed by subtracting the cumulative amount of the non-Federal entity's
unliquidated financial obligations and expenditures of funds under the Federal award from the cumulative
amount of the funds that the Federal awarding agency or pass-through entity authorized the non-Federal
entity to obligate.

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2 CFR 200.1 “Voluntary committed cost sharing”

Voluntary committed cost sharing means cost sharing specifically pledged on a voluntary basis in the proposal's
budget on the part of the non-Federal entity and that becomes a binding requirement of Federal award.
See also § 200.306.
[85 FR 49529, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

Subpart B—General Provisions
§ 200.100 Purpose.
(a) Purpose.
(1) This part establishes uniform administrative requirements, cost principles, and audit requirements
for Federal awards to non-Federal entities, as described in § 200.101. Federal awarding agencies
must not impose additional or inconsistent requirements, except as provided in §§ 200.102 and
200.211, or unless specifically required by Federal statute, regulation, or Executive order.
(2) This part provides the basis for a systematic and periodic collection and uniform submission by
Federal agencies of information on all Federal financial assistance programs to the Office of
Management and Budget (OMB). It also establishes Federal policies related to the delivery of this
information to the public, including through the use of electronic media. It prescribes the manner in
which General Services Administration (GSA), OMB, and Federal agencies that administer Federal
financial assistance programs are to carry out their statutory responsibilities under the Federal
Program Information Act (31 U.S.C. 6101–6106).
(b) Administrative requirements. Subparts B through D of this part set forth the uniform administrative
requirements for grant and cooperative agreements, including the requirements for Federal awarding
agency management of Federal grant programs before the Federal award has been made, and the
requirements Federal awarding agencies may impose on non-Federal entities in the Federal award.
(c) Cost principles. Subpart E of this part establishes principles for determining the allowable costs incurred
by non-Federal entities under Federal awards. The principles are for the purpose of cost determination
and are not intended to identify the circumstances or dictate the extent of Federal Government
participation in the financing of a particular program or project. The principles are designed to provide
that Federal awards bear their fair share of cost recognized under these principles except where restricted
or prohibited by statute.
(d) Single Audit Requirements and Audit Follow-up. Subpart F of this part is issued pursuant to the Single
Audit Act Amendments of 1996, (31 U.S.C. 7501–7507). It sets forth standards for obtaining consistency
and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards.
These provisions also provide the policies and procedures for Federal awarding agencies and passthrough entities when using the results of these audits.
(e) Guidance on challenges and prizes. For OMB guidance to Federal awarding agencies on challenges and
prizes, please see memo M–10–11 Guidance on the Use of Challenges and Prizes to Promote Open
Government, issued March 8, 2010, or its successor.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49536, Aug. 13, 2020]

§ 200.101 Applicability.
(a) General applicability to Federal agencies.
2 CFR 200.101(a) (enhanced display)

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(1) The requirements established in this part apply to Federal agencies that make Federal awards to
non-Federal entities. These requirements are applicable to all costs related to Federal awards.
(2) Federal awarding agencies may apply subparts A through E of this part to Federal agencies, for-profit
entities, foreign public entities, or foreign organizations, except where the Federal awarding agency
determines that the application of these subparts would be inconsistent with the international
responsibilities of the United States or the statutes or regulations of a foreign government.
(b) Applicability to different types of Federal awards.
(1) Throughout this part when the word “must” is used it indicates a requirement. Whereas, use of the
word “should” or “may” indicates a best practice or recommended approach rather than a
requirement and permits discretion.
(2) The following table describes what portions of this part apply to which types of Federal awards. The
terms and conditions of Federal awards (including this part) flow down to subawards to
subrecipients unless a particular section of this part or the terms and conditions of the Federal
award specifically indicate otherwise. This means that non-Federal entities must comply with
requirements in this part regardless of whether the non-Federal entity is a recipient or subrecipient of
a Federal award. Pass-through entities must comply with the requirements described in subpart D of
this part, §§ 200.331 through 200.333, but not any requirements in this part directed towards Federal
awarding agencies unless the requirements of this part or the terms and conditions of the Federal
award indicate otherwise.

Table 1 to Paragraph (b)

The following portions of this Part

Are applicable to the following
types of Federal Awards and FixedPrice Contracts and Subcontracts
(except as noted in paragraphs (d)
and (e) of this section):

Are NOT applicable to the
following types of Federal
Awards and Fixed-Price
Contracts and
Subcontracts:

Subpart A—Acronyms and Definitions

—All

Subpart B—General Provisions, except
for §§ 200.111 English Language,
200.112 Conflict of Interest, 200.113
Mandatory Disclosures

—All

§§ 200.111 English Language, 200.112
Conflict of Interest, 200.113 Mandatory
Disclosures

—Grant Agreements and
cooperative agreements

—Agreements for loans,
loan guarantees, interest
subsidies and insurance.
—Procurement contracts
awarded by Federal
Agencies under the
Federal Acquisition
Regulation and
subcontracts under those
contracts.

Subparts C–D, except for §§ 200.203
Requirement to provide public notice of
Federal financial assistance programs,

—Grant Agreements and
cooperative agreements

—Agreements for loans,
loan guarantees, interest
subsidies and insurance.

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The following portions of this Part

Are applicable to the following
types of Federal Awards and FixedPrice Contracts and Subcontracts
(except as noted in paragraphs (d)
and (e) of this section):

200.303 Internal controls, 200.331–333
Subrecipient Monitoring and
Management

2 CFR 200.101(b)(2)

Are NOT applicable to the
following types of Federal
Awards and Fixed-Price
Contracts and
Subcontracts:
—Procurement contracts
awarded by Federal
Agencies under the
Federal Acquisition
Regulation and
subcontracts under those
contracts.

§ 200.203 Requirement to provide
public notice of Federal financial
assistance programs

—Grant Agreements and
cooperative agreements
—Agreements for loans, loan
guarantees, interest subsidies and
insurance

§§ 200.303 Internal controls,
200.331–333 Subrecipient Monitoring
and Management

—All

Subpart E—Cost Principles

—Grant Agreements and
cooperative agreements, except
those providing food commodities
—All procurement contracts under
the Federal Acquisition Regulations
except those that are not
negotiated

—Grant agreements and
cooperative agreements
providing foods
commodities.
—Fixed amount awards.
—Agreements for loans,
loans guarantees, interest
subsidies and insurance.
—Federal awards to
hospitals (see Appendix IX
Hospital Cost Principles).

Subpart F—Audit Requirements

—Grant Agreements and
cooperative agreements
—Contracts and subcontracts,
except for fixed price contacts and
subcontracts, awarded under the
Federal Acquisition Regulation
—Agreements for loans, loans
guarantees, interest subsidies and
insurance and other forms of
Federal Financial Assistance as
defined by the Single Audit Act
Amendment of 1996

—Fixed-price contracts and
subcontracts awarded
under the Federal
Acquisition Regulation.

2 CFR 200.101(b)(2) (enhanced display)

—Procurement contracts
awarded by Federal
Agencies under the
Federal Acquisition
Regulation and
subcontracts under those
contracts.

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(c) Federal award of cost-reimbursement contract under the FAR to a non-Federal entity. When a non-Federal
entity is awarded a cost-reimbursement contract, only subpart D, §§ 200.331 through 200.333, and
subparts E and F of this part are incorporated by reference into the contract, but the requirements of
subparts D, E, and F are supplementary to the FAR and the contract. When the Cost Accounting Standards
(CAS) are applicable to the contract, they take precedence over the requirements of this part, including
subpart F of this part, which are supplementary to the CAS requirements. In addition, costs that are made
unallowable under 10 U.S.C. 2324(e) and 41 U.S.C. 4304(a) as described in the FAR 48 CFR part 31,
subpart 31.2, and 48 CFR 31.603 are always unallowable. For requirements other than those covered in
subpart D, §§ 200.331 through 200.333, and subparts E and F of this part, the terms of the contract and
the FAR apply. Note that when a non-Federal entity is awarded a FAR contract, the FAR applies, and the
terms and conditions of the contract shall prevail over the requirements of this part.
(d) Governing provisions. With the exception of subpart F of this part, which is required by the Single Audit
Act, in any circumstances where the provisions of Federal statutes or regulations differ from the
provisions of this part, the provision of the Federal statutes or regulations govern. This includes, for
agreements with Indian tribes, the provisions of the Indian Self-Determination and Education and
Assistance Act (ISDEAA), as amended, 25 U.S.C 450–458ddd–2.
(e) Program applicability. Except for §§ 200.203, 200.216, and 200.331 through 200.333, the requirements in
subparts C, D, and E of this part do not apply to the following programs:
(1) The block grant awards authorized by the Omnibus Budget Reconciliation Act of 1981 (including
Community Services), except to the extent that subpart E of this part apply to subrecipients of
Community Services Block Grant funds pursuant to 42 U.S.C. 9916(a)(1)(B);
(2) Federal awards to local education agencies under 20 U.S.C. 7702–7703b, (portions of the Impact Aid
program);
(3) Payments under the Department of Veterans Affairs' State Home Per Diem Program (38 U.S.C.
1741); and
(4) Federal awards authorized under the Child Care and Development Block Grant Act of 1990, as
amended:
(i)

Child Care and Development Block Grant (42 U.S.C. 9858).

(ii) Child Care Mandatory and Matching Funds of the Child Care and Development Fund (42 U.S.C.
9858).
(f) Additional program applicability. Except for §§ 200.203 and 200.216, the guidance in subpart C of this part
does not apply to the following programs:
(1) Entitlement Federal awards to carry out the following programs of the Social Security Act:
(i)

Temporary Assistance for Needy Families (title IV–A of the Social Security Act, 42 U.S.C.
601–619);

(ii) Child Support Enforcement and Establishment of Paternity (title IV–D of the Social Security Act,
42 U.S.C. 651–669b);
(iii) Foster Care and Adoption Assistance (title IV–E of the Act, 42 U.S.C. 670–679c);
(iv) Aid to the Aged, Blind, and Disabled (titles I, X, XIV, and XVI–AABD of the Act, as amended);

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(v) Medical Assistance (Medicaid) (title XIX of the Act, 42 U.S.C. 1396–1396w–5) not including the
State Medicaid Fraud Control program authorized by section 1903(a)(6)(B) of the Social
Security Act (42 U.S.C. 1396b(a)(6)(B)); and
(vi) Children's Health Insurance Program (title XXI of the Act, 42 U.S.C. 1397aa–1397mm).
(2) A Federal award for an experimental, pilot, or demonstration project that is also supported by a
Federal award listed in paragraph (f)(1) of this section.
(3) Federal awards under subsection 412(e) of the Immigration and Nationality Act 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 and benefits (8 U.S.C. 1522(e)).
(4) Entitlement awards under the following programs of The National School Lunch Act:
(i)

National School Lunch Program (section 4 of the Act, 42 U.S.C. 1753);

(ii) Commodity Assistance (section 6 of the Act, 42 U.S.C. 1755);
(iii) Special Meal Assistance (section 11 of the Act, 42 U.S.C. 1759a);
(iv) Summer Food Service Program for Children (section 13 of the Act, 42 U.S.C. 1761); and
(v) Child and Adult Care Food Program (section 17 of the Act, 42 U.S.C. 1766).
(5) Entitlement awards under the following programs of The Child Nutrition Act of 1966:
(i)

Special Milk Program (section 3 of the Act, 42 U.S.C. 1772);

(ii) School Breakfast Program (section 4 of the Act, 42 U.S.C. 1773); and
(iii) State Administrative Expenses (section 7 of the Act, 42 U.S.C. 1776).
(6) Entitlement awards for State Administrative Expenses under The Food and Nutrition Act of 2008
(section 16 of the Act, 7 U.S.C. 2025).
(7) Non-discretionary Federal awards under the following non-entitlement programs:
(i)

Special Supplemental Nutrition Program for Women, Infants and Children (section 17 of the
Child Nutrition Act of 1966) 42 U.S.C. 1786;

(ii) The Emergency Food Assistance Programs (Emergency Food Assistance Act of 1983) 7 U.S.C.
7501 note; and
(iii) Commodity Supplemental Food Program (section 5 of the Agriculture and Consumer Protection
Act of 1973) 7 U.S.C. 612c note.
[85 FR 49536, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.102 Exceptions.
(a) With the exception of subpart F of this part, OMB may allow exceptions for classes of Federal awards or
non-Federal entities subject to the requirements of this part when exceptions are not prohibited by
statute. In the interest of maximum uniformity, exceptions from the requirements of this part will be
permitted as described in this section.
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(b) Exceptions on a case-by-case basis for individual non-Federal entities may be authorized by the Federal
awarding agency or cognizant agency for indirect costs, except where otherwise required by law or where
OMB or other approval is expressly required by this part.
(c) The Federal awarding agency may adjust requirements to a class of Federal awards or non-Federal
entities when approved by OMB, or when required by Federal statutes or regulations, except for the
requirements in subpart F of this part. A Federal awarding agency may apply less restrictive requirements
when making fixed amount awards as defined in subpart A of this part, except for those requirements
imposed by statute or in subpart F of this part.
(d) Federal awarding agencies may request exceptions in support of innovative program designs that apply a
risk-based, data-driven framework to alleviate select compliance requirements and hold recipients
accountable for good performance. See also § 200.206.
[85 FR 49538, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.103 Authorities.
This part is issued under the following authorities.
(a) Subparts B through D of this part are authorized under 31 U.S.C. 503 (the Chief Financial Officers Act,
Functions of the Deputy Director for Management), 41 U.S.C. 1101–1131 (the Office of Federal
Procurement Policy Act), Reorganization Plan No. 2 of 1970, and Executive Order 11541 (“Prescribing the
Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of
the President”), the Single Audit Act Amendments of 1996, (31 U.S.C. 7501–7507), as well as The Federal
Program Information Act (Pub. L. 95–220 and Pub. L. 98–169, as amended, codified at 31 U.S.C.
6101–6106).
(b) Subpart E of this part is authorized under the Budget and Accounting Act of 1921, as amended; the
Budget and Accounting Procedures Act of 1950, as amended (31 U.S.C. 1101–1125); the Chief Financial
Officers Act of 1990 (31 U.S.C. 503–504); Reorganization Plan No. 2 of 1970; and Executive Order 11541,
“Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the
Executive Office of the President.”
(c) Subpart F of this part is authorized under the Single Audit Act Amendments of 1996, (31 U.S.C.
7501–7507).
[85 FR 49538, Aug. 13, 2020]

§ 200.104 Supersession.
As described in § 200.110, this part supersedes the following OMB guidance documents and regulations under title
2 of the Code of Federal Regulations:
(a) A–21, “Cost Principles for Educational Institutions” (2 CFR part 220);
(b) A–87, “Cost Principles for State, Local and Indian Tribal Governments” (2 CFR part 225) and also FEDERAL
REGISTER notice 51 FR 552 (January 6, 1986);
(c) A–89, “Federal Domestic Assistance Program Information”;
(d) A–102, “Grant Awards and Cooperative Agreements with State and Local Governments”;
2 CFR 200.104(d) (enhanced display)

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(e) A–110, “Uniform Administrative Requirements for Awards and Other Agreements with Institutions of
Higher Education, Hospitals, and Other Nonprofit Organizations” (codified at 2 CFR 215);
(f) A–122, “Cost Principles for Non-Profit Organizations” (2 CFR part 230);
(g) A–133, “Audits of States, Local Governments and Non-Profit Organizations”; and
(h) Those sections of A–50 related to audits performed under subpart F of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75882, Dec. 19, 2014; 85 FR 49538, Aug. 13, 2020]

§ 200.105 Effect on other issuances.
(a) Superseding inconsistent requirements. For Federal awards subject to this part, all administrative
requirements, program manuals, handbooks and other non-regulatory materials that are inconsistent with
the requirements of this part must be superseded upon implementation of this part by the Federal agency,
except to the extent they are required by statute or authorized in accordance with the provisions in §
200.102.
(b) Imposition of requirements on recipients. Agencies may impose legally binding requirements on recipients
only through the notice and public comment process through an approved agency process, including as
authorized by this part, other statutes or regulations, or as incorporated into the terms of a Federal award.
[85 FR 49538, Aug. 13, 2020]

§ 200.106 Agency implementation.
The specific requirements and responsibilities of Federal agencies and non-Federal entities are set forth in this part.
Federal agencies making Federal awards to non-Federal entities must implement the language in subparts C
through F of this part in codified regulations unless different provisions are required by Federal statute or are
approved by OMB.
[85 FR 49538, Aug. 13, 2020]

§ 200.107 OMB responsibilities.
OMB will review Federal agency regulations and implementation of this part, and will provide interpretations of
policy requirements and assistance to ensure effective and efficient implementation. Any exceptions will be subject
to approval by OMB. Exceptions will only be made in particular cases where adequate justification is presented.

§ 200.108 Inquiries.
Inquiries concerning this part may be directed to the Office of Federal Financial Management Office of Management
and Budget, in Washington, DC. Non-Federal entities' inquiries should be addressed to the Federal awarding agency,
cognizant agency for indirect costs, cognizant or oversight agency for audit, or pass-through entity as appropriate.

§ 200.109 Review date.
OMB will review this part at least every five years after December 26, 2013.

2 CFR 200.109 (enhanced display)

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§ 200.110 Effective/applicability date.
(a) The standards set forth in this part that affect the administration of Federal awards issued by Federal
awarding agencies become effective once implemented by Federal awarding agencies or when any future
amendment to this part becomes final.
(b) Existing negotiated indirect cost rates (as of the publication date of the revisions to the guidance) will
remain in place until they expire. The effective date of changes to indirect cost rates must be based upon
the date that a newly re-negotiated rate goes into effect for a specific non-Federal entity's fiscal year.
Therefore, for indirect cost rates and cost allocation plans, the revised Uniform Guidance (as of the
publication date for revisions to the guidance) become effective in generating proposals and negotiating a
new rate (when the rate is re-negotiated).
[85 FR 49538, Aug. 13, 2020]

§ 200.111 English language.
(a) All Federal financial assistance announcements and Federal award information must be in the English
language. Applications must be submitted in the English language and must be in the terms of U.S.
dollars. If the Federal awarding agency receives applications in another currency, the Federal awarding
agency will evaluate the application by converting the foreign currency to United States currency using the
date specified for receipt of the application.
(b) Non-Federal entities may translate the Federal award and other documents into another language. In the
event of inconsistency between any terms and conditions of the Federal award and any translation into
another language, the English language meaning will control. Where a significant portion of the nonFederal entity's employees who are working on the Federal award are not fluent in English, the non-Federal
entity must provide the Federal award in English and the language(s) with which employees are more
familiar.

§ 200.112 Conflict of interest.
The Federal awarding agency must establish conflict of interest policies for Federal awards. The non-Federal entity
must disclose in writing any potential conflict of interest to the Federal awarding agency or pass-through entity in
accordance with applicable Federal awarding agency policy.

§ 200.113 Mandatory disclosures.
The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal
awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity
violations potentially affecting the Federal award. Non-Federal entities that have received a Federal award including
the term and condition outlined in appendix XII to this part are required to report certain civil, criminal, or
administrative proceedings to SAM (currently FAPIIS). Failure to make required disclosures can result in any of the
remedies described in § 200.339. (See also 2 CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.)
[85 FR 49539, Aug. 13, 2020]

Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards
Source: 85 FR 49539, Aug. 13, 2020, unless otherwise noted.
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§ 200.200 Purpose.
Sections 200.201 through 200.216 prescribe instructions and other pre-award matters to be used by Federal
awarding agencies in the program planning, announcement, application and award processes.

§ 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements,
and contracts.
(a) Federal award instrument. The Federal awarding agency or pass-through entity must decide on the
appropriate instrument for the Federal award (i.e., grant agreement, cooperative agreement, or contract) in
accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301–08).
(b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal
awarding agencies, or pass-through entities as permitted in § 200.333, may use fixed amount awards (see
Fixed amount awards in § 200.1) to which the following conditions apply:
(1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a
guide. The Federal awarding agency or pass-through entity may use fixed amount awards if the
project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing
data is available to establish a fixed amount award based on a reasonable estimate of actual cost.
Payments are based on meeting specific requirements of the Federal award. Accountability is based
on performance and results. Except in the case of termination before completion of the Federal
award, there is no governmental review of the actual costs incurred by the non-Federal entity in
performance of the award. Some of the ways in which the Federal award may be paid include, but
are not limited to:
(i)

In several partial payments, the amount of each agreed upon in advance, and the “milestone” or
event triggering the payment also agreed upon in advance, and set forth in the Federal award;

(ii) On a unit price basis, for a defined unit or units, at a defined price or prices, agreed to in
advance of performance of the Federal award and set forth in the Federal award; or,
(iii) In one payment at Federal award completion.
(2) A fixed amount award cannot be used in programs which require mandatory cost sharing or match.
(3) The non-Federal entity must certify in writing to the Federal awarding agency or pass-through entity
at the end of the Federal award that the project or activity was completed or the level of effort was
expended. If the required level of activity or effort was not carried out, the amount of the Federal
award must be adjusted.
(4) Periodic reports may be established for each Federal award.
(5) Changes in principal investigator, project leader, project partner, or scope of effort must receive the
prior written approval of the Federal awarding agency or pass-through entity.

§ 200.202 Program planning and design.
The Federal awarding agency must design a program and create an Assistance Listing before announcing the
Notice of Funding Opportunity. The program must be designed with clear goals and objectives that facilitate the
delivery of meaningful results consistent with the Federal authorizing legislation of the program. Program
performance shall be measured based on the goals and objectives developed during program planning and design.
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See § 200.301 for more information on performance measurement. Performance measures may differ depending
on the type of program. The program must align with the strategic goals and objectives within the Federal awarding
agency's performance plan and should support the Federal awarding agency's performance measurement,
management, and reporting as required by Part 6 of OMB Circular A–11 (Preparation, Submission, and Execution of
the Budget). The program must also be designed to align with the Program Management Improvement
Accountability Act (Pub. L. 114–264).

§ 200.203 Requirement to provide public notice of Federal financial assistance programs.
(a) The Federal awarding agency must notify the public of Federal programs in the Federal Assistance
Listings maintained by the General Services Administration (GSA).
(1) The Federal Assistance Listings is the single, authoritative, governmentwide comprehensive source
of Federal financial assistance program information produced by the executive branch of the Federal
Government.
(2) The information that the Federal awarding agency must submit to GSA for approval by OMB is listed
in paragraph (b) of this section. GSA must prescribe the format for the submission in coordination
with OMB.
(3) The Federal awarding agency may not award Federal financial assistance without assigning it to a
program that has been included in the Federal Assistance Listings as required in this section unless
there are exigent circumstances requiring otherwise, such as timing requirements imposed by
statute.
(b) For each program that awards discretionary Federal awards, non-discretionary Federal awards, loans,
insurance, or any other type of Federal financial assistance, the Federal awarding agency must, to the
extent practicable, create, update, and manage Assistance Listings entries based on the authorizing
statute for the program and comply with additional guidance provided by GSA in consultation with OMB to
ensure consistent, accurate information is available to prospective applicants. Accordingly, Federal
awarding agencies must submit the following information to GSA:
(1) Program Description, Purpose, Goals, and Measurement. A brief summary of the statutory or
regulatory requirements of the program and its intended outcome. Where appropriate, the Program
Description, Purpose, Goals, and Measurement should align with the strategic goals and objectives
within the Federal awarding agency's performance plan and should support the Federal awarding
agency's performance measurement, management, and reporting as required by Part 6 of OMB
Circular A–11;
(2) Identification. Identification of whether the program makes Federal awards on a discretionary basis
or the Federal awards are prescribed by Federal statute, such as in the case of formula grants.
(3) Projected total amount of funds available for the program. Estimates based on previous year funding
are acceptable if current appropriations are not available at the time of the submission;
(4) Anticipated source of available funds. The statutory authority for funding the program and, to the
extent possible, agency, sub-agency, or, if known, the specific program unit that will issue the Federal
awards, and associated funding identifier (e.g., Treasury Account Symbol(s));
(5) General eligibility requirements. The statutory, regulatory or other eligibility factors or considerations
that determine the applicant's qualification for Federal awards under the program (e.g., type of nonFederal entity); and
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2 CFR 200.203(b)(6)

(6) Applicability of Single Audit Requirements. Applicability of Single Audit Requirements as required by
subpart F of this part.

§ 200.204 Notices of funding opportunities.
For discretionary grants and cooperative agreements that are competed, the Federal awarding agency must
announce specific funding opportunities by providing the following information in a public notice:
(a) Summary information in notices of funding opportunities. The Federal awarding agency must display the
following information posted on the OMB-designated governmentwide website for funding and applying
for Federal financial assistance, in a location preceding the full text of the announcement:
(1) Federal Awarding Agency Name;
(2) Funding Opportunity Title;
(3) Announcement Type (whether the funding opportunity is the initial announcement of this funding
opportunity or a modification of a previously announced opportunity);
(4) Funding Opportunity Number (required, if applicable). If the Federal awarding agency has assigned or
will assign a number to the funding opportunity announcement, this number must be provided;
(5) Assistance Listings Number(s);
(6) Key Dates. Key dates include due dates for applications or Executive Order 12372 submissions, as
well as for any letters of intent or pre-applications. For any announcement issued before a program's
application materials are available, key dates also include the date on which those materials will be
released; and any other additional information, as deemed applicable by the relevant Federal
awarding agency.
(b) Availability period. The Federal awarding agency must generally make all funding opportunities available
for application for at least 60 calendar days. The Federal awarding agency may make a determination to
have a less than 60 calendar day availability period but no funding opportunity should be available for less
than 30 calendar days unless exigent circumstances require as determined by the Federal awarding
agency head or delegate.
(c) Full text of funding opportunities. The Federal awarding agency must include the following information in
the full text of each funding opportunity. For specific instructions on the content required in this section,
refer to appendix I to this part.
(1) Full programmatic description of the funding opportunity.
(2) Federal award information, including sufficient information to help an applicant make an informed
decision about whether to submit an application. (See also § 200.414(c)(4)).
(3) Specific eligibility information, including any factors or priorities that affect an applicant's or its
application's eligibility for selection.
(4) Application Preparation and Submission Information, including the applicable submission dates and
time.
(5) Application Review Information including the criteria and process to be used to evaluate
applications. See also §§ 200.205 and 200.206.
(6) Federal Award Administration Information. See also § 200.211.
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2 CFR 200.204(c)(7)

(7) Applicable terms and conditions for resulting awards, including any exceptions from these standard
terms.

§ 200.205 Federal awarding agency review of merit of proposals.
For discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must design
and execute a merit review process for applications, with the objective of selecting recipients most likely to be
successful in delivering results based on the program objectives outlined in section § 200.202. A merit review is an
objective process of evaluating Federal award applications in accordance with written standards set forth by the
Federal awarding agency. This process must be described or incorporated by reference in the applicable funding
opportunity (see appendix I to this part.). See also § 200.204. The Federal awarding agency must also periodically
review its merit review process.

§ 200.206 Federal awarding agency review of risk posed by applicants.
(a) Review of OMB-designated repositories of governmentwide data.
(1) Prior to making a Federal award, the Federal awarding agency is required by the Payment Integrity
Information Act of 2019, 31 U.S.C. 3301 note, and 41 U.S.C. 2313 to review information available
through any OMB-designated repositories of governmentwide eligibility qualification or financial
integrity information as appropriate. See also suspension and debarment requirements at 2 CFR part
180 as well as individual Federal agency suspension and debarment regulations in title 2 of the Code
of Federal Regulations.
(2) In accordance 41 U.S.C. 2313, the Federal awarding agency is required to review the non-public
segment of the OMB-designated integrity and performance system accessible through SAM
(currently the Federal Awardee Performance and Integrity Information System (FAPIIS)) prior to
making a Federal award where the Federal share is expected to exceed the simplified acquisition
threshold, defined in 41 U.S.C. 134, over the period of performance. As required by Public Law
112–239, National Defense Authorization Act for Fiscal Year 2013, prior to making a Federal award,
the Federal awarding agency must consider all of the information available through FAPIIS with
regard to the applicant and any immediate highest level owner, predecessor (i.e.; a non-Federal entity
that is replaced by a successor), or subsidiary, identified for that applicant in FAPIIS, if applicable. At
a minimum, the information in the system for a prior Federal award recipient must demonstrate a
satisfactory record of executing programs or activities under Federal grants, cooperative
agreements, or procurement awards; and integrity and business ethics. The Federal awarding
agency may make a Federal award to a recipient who does not fully meet these standards, if it is
determined that the information is not relevant to the current Federal award under consideration or
there are specific conditions that can appropriately mitigate the effects of the non-Federal entity's
risk in accordance with § 200.208.
(b) Risk evaluation.
(1) The Federal awarding agency must have in place a framework for evaluating the risks posed by
applicants before they receive Federal awards. This evaluation may incorporate results of the
evaluation of the applicant's eligibility or the quality of its application. If the Federal awarding agency
determines that a Federal award will be made, special conditions that correspond to the degree of
risk assessed may be applied to the Federal award. Criteria to be evaluated must be described in the
announcement of funding opportunity described in § 200.204.

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(2) In evaluating risks posed by applicants, the Federal awarding agency may use a risk-based approach
and may consider any items such as the following:
(i)

Financial stability. Financial stability;

(ii) Management systems and standards. Quality of management systems and ability to meet the
management standards prescribed in this part;
(iii) History of performance. The applicant's record in managing Federal awards, if it is a prior
recipient of Federal awards, including timeliness of compliance with applicable reporting
requirements, conformance to the terms and conditions of previous Federal awards, and if
applicable, the extent to which any previously awarded amounts will be expended prior to future
awards;
(iv) Audit reports and findings. Reports and findings from audits performed under subpart F of this
part or the reports and findings of any other available audits; and
(v) Ability to effectively implement requirements. The applicant's ability to effectively implement
statutory, regulatory, or other requirements imposed on non-Federal entities.
(c) Risk-based requirements adjustment. The Federal awarding agency may adjust requirements when a riskevaluation indicates that it may be merited either pre-award or post-award.
(d) Suspension and debarment compliance.
(1) The Federal awarding agency must comply with the guidelines on governmentwide suspension and
debarment in 2 CFR part 180, and must require non-Federal entities to comply with these provisions.
These provisions restrict Federal awards, subawards and contracts with certain parties that are
debarred, suspended or otherwise excluded from or ineligible for participation in Federal programs
or activities.
[85 FR 49539, Aug. 13, 2020, as amended at 86 FR 10439, Feb. 22, 2021]

§ 200.207 Standard application requirements.
(a) Paperwork clearances. The Federal awarding agency may only use application information collections
approved by OMB under the Paperwork Reduction Act of 1995 and OMB's implementing regulations in 5
CFR part 1320 and in alignment with OMB-approved, governmentwide data elements available from the
OMB-designated standards lead. Consistent with these requirements, OMB will authorize additional
information collections only on a limited basis.
(b) Information collection. If applicable, the Federal awarding agency may inform applicants and recipients
that they do not need to provide certain information otherwise required by the relevant information
collection.

§ 200.208 Specific conditions.
(a) Federal awarding agencies are responsible for ensuring that specific Federal award conditions are
consistent with the program design reflected in § 200.202 and include clear performance expectations of
recipients as required in § 200.301.
(b) The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as
needed, in accordance with this section, based on an analysis of the following factors:
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(1) Based on the criteria set forth in § 200.206;
(2) The applicant or recipient's history of compliance with the general or specific terms and conditions
of a Federal award;
(3) The applicant or recipient's ability to meet expected performance goals as described in § 200.211; or
(4) A responsibility determination of an applicant or recipient.
(c) Additional Federal award conditions may include items such as the following:
(1) Requiring payments as reimbursements rather than advance payments;
(2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable
performance within a given performance period;
(3) Requiring additional, more detailed financial reports;
(4) Requiring additional project monitoring;
(5) Requiring the non-Federal entity to obtain technical or management assistance; or
(6) Establishing additional prior approvals.
(d) If the Federal awarding agency or pass-through entity is imposing additional requirements, they must
notify the applicant or non-Federal entity as to:
(1) The nature of the additional requirements;
(2) The reason why the additional requirements are being imposed;
(3) The nature of the action needed to remove the additional requirement, if applicable;
(4) The time allowed for completing the actions if applicable; and
(5) The method for requesting reconsideration of the additional requirements imposed.
(e) Any additional requirements must be promptly removed once the conditions that prompted them have
been satisfied.

§ 200.209 Certifications and representations.
Unless prohibited by the U.S. Constitution, Federal statutes or regulations, each Federal awarding agency or passthrough entity is authorized to require the non-Federal entity to submit certifications and representations required by
Federal statutes, or regulations on an annual basis. Submission may be required more frequently if the non-Federal
entity fails to meet a requirement of a Federal award.

§ 200.210 Pre-award costs.
For requirements on costs incurred by the applicant prior to the start date of the period of performance of the
Federal award, see § 200.458.

§ 200.211 Information contained in a Federal award.
A Federal award must include the following information:

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(a) Federal award performance goals. Performance goals, indicators, targets, and baseline data must be
included in the Federal award, where applicable. The Federal awarding agency must also specify how
performance will be assessed in the terms and conditions of the Federal award, including the timing and
scope of expected performance. See §§ 200.202 and 200.301 for more information on Federal award
performance goals.
(b) General Federal award information. The Federal awarding agency must include the following general
Federal award information in each Federal award:
(1) Recipient name (which must match the name associated with its unique entity identifier as defined
at 2 CFR 25.315);
(2) Recipient's unique entity identifier;
(3) Unique Federal Award Identification Number (FAIN);
(4) Federal Award Date (see Federal award date in § 200.201);
(5) Period of Performance Start and End Date;
(6) Budget Period Start and End Date;
(7) Amount of Federal Funds Obligated by this action;
(8) Total Amount of Federal Funds Obligated;
(9) Total Approved Cost Sharing or Matching, where applicable;
(10) Total Amount of the Federal Award including approved Cost Sharing or Matching;
(11) Budget Approved by the Federal Awarding Agency;
(11) Federal award description, (to comply with statutory requirements (e.g., FFATA));
(12) Name of Federal awarding agency and contact information for awarding official,
(13) Assistance Listings Number and Title;
(14) Identification of whether the award is R&D; and
(15) Indirect cost rate for the Federal award (including if the de minimis rate is charged per § 200.414).
(c) General terms and conditions.
(1) Federal awarding agencies must incorporate the following general terms and conditions either in the
Federal award or by reference, as applicable:
(i)

Administrative requirements. Administrative requirements implemented by the Federal awarding
agency as specified in this part.

(ii) National policy requirements. These include statutory, executive order, other Presidential
directive, or regulatory requirements that apply by specific reference and are not programspecific. See § 200.300 Statutory and national policy requirements.
(iii) Recipient integrity and performance matters. If the total Federal share of the Federal award may
include more than $500,000 over the period of performance, the Federal awarding agency must
include the term and condition available in appendix XII of this part. See also § 200.113.

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(iv) Future budget periods. If it is anticipated that the period of performance will include multiple
budget periods, the Federal awarding agency must indicate that subsequent budget periods are
subject to the availability of funds, program authority, satisfactory performance, and
compliance with the terms and conditions of the Federal award.
(v) Termination provisions. Federal awarding agencies must make recipients aware, in a clear and
unambiguous manner, of the termination provisions in § 200.340, including the applicable
termination provisions in the Federal awarding agency's regulations or in each Federal award.
(2) The Federal award must incorporate, by reference, all general terms and conditions of the award,
which must be maintained on the agency's website.
(3) If a non-Federal entity requests a copy of the full text of the general terms and conditions, the Federal
awarding agency must provide it.
(4) Wherever the general terms and conditions are publicly available, the Federal awarding agency must
maintain an archive of previous versions of the general terms and conditions, with effective dates,
for use by the non-Federal entity, auditors, or others.
(d) Federal awarding agency, program, or Federal award specific terms and conditions. The Federal awarding
agency must include with each Federal award any terms and conditions necessary to communicate
requirements that are in addition to the requirements outlined in the Federal awarding agency's general
terms and conditions. See also § 200.208. Whenever practicable, these specific terms and conditions also
should be shared on the agency's website and in notices of funding opportunities (as outlined in §
200.204) in addition to being included in a Federal award. See also § 200.207.
(e) Federal awarding agency requirements. Any other information required by the Federal awarding agency.

§ 200.212 Public access to Federal award information.
(a) In accordance with statutory requirements for Federal spending transparency (e.g., FFATA), except as
noted in this section, for applicable Federal awards the Federal awarding agency must announce all
Federal awards publicly and publish the required information on a publicly available OMB-designated
governmentwide website.
(b) All information posted in the designated integrity and performance system accessible through SAM
(currently FAPIIS) on or after April 15, 2011 will be publicly available after a waiting period of 14 calendar
days, except for:
(1) Past performance reviews required by Federal Government contractors in accordance with the
Federal Acquisition Regulation (FAR) 48 CFR part 42, subpart 42.15;
(2) Information that was entered prior to April 15, 2011; or
(3) Information that is withdrawn during the 14-calendar day waiting period by the Federal Government
official.
(c) Nothing in this section may be construed as requiring the publication of information otherwise exempt
under the Freedom of Information Act (5 U.S.C 552), or controlled unclassified information pursuant to
Executive Order 13556.

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§ 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal
award.
(a) If a Federal awarding agency does not make a Federal award to a non-Federal entity because the official
determines that the non-Federal entity does not meet either or both of the minimum qualification
standards as described in § 200.206(a)(2), the Federal awarding agency must report that determination to
the designated integrity and performance system accessible through SAM (currently FAPIIS), only if all of
the following apply:
(1) The only basis for the determination described in this paragraph (a) is the non-Federal entity's prior
record of executing programs or activities under Federal awards or its record of integrity and
business ethics, as described in § 200.206(a)(2) (i.e., the entity was determined to be qualified based
on all factors other than those two standards); and
(2) The total Federal share of the Federal award that otherwise would be made to the non-Federal entity
is expected to exceed the simplified acquisition threshold over the period of performance.
(b) The Federal awarding agency is not required to report a determination that a non-Federal entity is not
qualified for a Federal award if they make the Federal award to the non-Federal entity and include specific
award terms and conditions, as described in § 200.208.
(c) If a Federal awarding agency reports a determination that a non-Federal entity is not qualified for a Federal
award, as described in paragraph (a) of this section, the Federal awarding agency also must notify the
non-Federal entity that—
(1) The determination was made and reported to the designated integrity and performance system
accessible through SAM, and include with the notification an explanation of the basis for the
determination;
(2) The information will be kept in the system for a period of five years from the date of the
determination, as required by section 872 of Public Law 110–417, as amended (41 U.S.C. 2313),
then archived;
(3) Each Federal awarding agency that considers making a Federal award to the non-Federal entity
during that five year period must consider that information in judging whether the non-Federal entity
is qualified to receive the Federal award when the total Federal share of the Federal award is
expected to include an amount of Federal funding in excess of the simplified acquisition threshold
over the period of performance;
(4) The non-Federal entity may go to the awardee integrity and performance portal accessible through
SAM (currently the Contractor Performance Assessment Reporting System (CPARS)) and comment
on any information the system contains about the non-Federal entity itself; and
(5) Federal awarding agencies will consider that non-Federal entity's comments in determining whether
the non-Federal entity is qualified for a future Federal award.
(d) If a Federal awarding agency enters information into the designated integrity and performance system
accessible through SAM about a determination that a non-Federal entity is not qualified for a Federal
award and subsequently:
(1) Learns that any of that information is erroneous, the Federal awarding agency must correct the
information in the system within three business days; and

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(2) Obtains an update to that information that could be helpful to other Federal awarding agencies, the
Federal awarding agency is strongly encouraged to amend the information in the system to
incorporate the update in a timely way.
(e) Federal awarding agencies must not post any information that will be made publicly available in the nonpublic segment of designated integrity and performance system that is covered by a disclosure
exemption under the Freedom of Information Act. If the recipient asserts within seven calendar days to
the Federal awarding agency that posted the information that some or all of the information made
publicly available is covered by a disclosure exemption under the Freedom of Information Act, the Federal
awarding agency that posted the information must remove the posting within seven calendar days of
receiving the assertion. Prior to reposting the releasable information, the Federal awarding agency must
resolve the issue in accordance with the agency's Freedom of Information Act procedures.

§ 200.214 Suspension and debarment.
Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing
Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards,
and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for
participation in Federal assistance programs or activities.

§ 200.215 Never contract with the enemy.
Federal awarding agencies and recipients are subject to the regulations implementing Never Contract with the
Enemy in 2 CFR part 183. The regulations in 2 CFR part 183 affect covered contracts, grants and cooperative
agreements that are expected to exceed $50,000 within the period of performance, are performed outside the
United States and its territories, and are in support of a contingency operation in which members of the Armed
Forces are actively engaged in hostilities.

§ 200.216 Prohibition on certain telecommunications and video surveillance services or
equipment.
(a) Recipients and subrecipients are prohibited from obligating or expending loan or grant funds to:
(1) Procure or obtain;
(2) Extend or renew a contract to procure or obtain; or
(3) Enter into a contract (or extend or renew a contract) to procure or obtain equipment, services, or
systems that uses covered telecommunications equipment or services as a substantial or essential
component of any system, or as critical technology as part of any system. As described in Public
Law 115–232, section 889, covered telecommunications equipment is telecommunications
equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or
affiliate of such entities).
(i)

For the purpose of public safety, security of government facilities, physical security surveillance
of critical infrastructure, and other national security purposes, video surveillance and
telecommunications equipment produced by Hytera Communications Corporation, Hangzhou
Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or
affiliate of such entities).

(ii) Telecommunications or video surveillance services provided by such entities or using such
equipment.
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(iii) Telecommunications or video surveillance equipment or services produced or provided by an
entity that the Secretary of Defense, in consultation with the Director of the National
Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an
entity owned or controlled by, or otherwise connected to, the government of a covered foreign
country.
(b) In implementing the prohibition under Public Law 115–232, section 889, subsection (f), paragraph (1),
heads of executive agencies administering loan, grant, or subsidy programs shall prioritize available
funding and technical support to assist affected businesses, institutions and organizations as is
reasonably necessary for those affected entities to transition from covered communications equipment
and services, to procure replacement equipment and services, and to ensure that communications service
to users and customers is sustained.
(c) See Public Law 115–232, section 889 for additional information.
(d) See also § 200.471.

Subpart D—Post Federal Award Requirements
Source: 85 FR 49543, Aug. 13, 2020, unless otherwise noted.

§ 200.300 Statutory and national policy requirements.
(a) The Federal awarding agency must manage and administer the Federal award in a manner so as to ensure
that Federal funding is expended and associated programs are implemented in full accordance with the
U.S. Constitution, Federal Law, and public policy requirements: Including, but not limited to, those
protecting free speech, religious liberty, public welfare, the environment, and prohibiting discrimination.
The Federal awarding agency must communicate to the non-Federal entity all relevant public policy
requirements, including those in general appropriations provisions, and incorporate them either directly or
by reference in the terms and conditions of the Federal award.
(b) The non-Federal entity is responsible for complying with all requirements of the Federal award. For all
Federal awards, this includes the provisions of FFATA, which includes requirements on executive
compensation, and also requirements implementing the Act for the non-Federal entity at 2 CFR parts 25
and 170. See also statutory requirements for whistleblower protections at 10 U.S.C. 2409, 41 U.S.C. 4712,
and 10 U.S.C. 2324, 41 U.S.C. 4304 and 4310.

§ 200.301 Performance measurement.
(a) The Federal awarding agency must measure the recipient's performance to show achievement of program
goals and objectives, share lessons learned, improve program outcomes, and foster adoption of
promising practices. Program goals and objectives should be derived from program planning and design.
See § 200.202 for more information. Where appropriate, the Federal award may include specific program
goals, indicators, targets, baseline data, data collection, or expected outcomes (such as outputs, or
services performance or public impacts of any of these) with an expected timeline for accomplishment.
Where applicable, this should also include any performance measures or independent sources of data
that may be used to measure progress. The Federal awarding agency will determine how performance
progress is measured, which may differ by program. Performance measurement progress must be both
measured and reported. See § 200.329 for more information on monitoring program performance. The
Federal awarding agency may include program-specific requirements, as applicable. These requirements
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must be aligned, to the extent permitted by law, with the Federal awarding agency strategic goals,
strategic objectives or performance goals that are relevant to the program. See also OMB Circular A–11,
Preparation, Submission, and Execution of the Budget Part 6.
(b) The Federal awarding agency should provide recipients with clear performance goals, indicators, targets,
and baseline data as described in § 200.211. Performance reporting frequency and content should be
established to not only allow the Federal awarding agency to understand the recipient progress but also to
facilitate identification of promising practices among recipients and build the evidence upon which the
Federal awarding agency's program and performance decisions are made. See § 200.328 for more
information on reporting program performance.
(c) This provision is designed to operate in tandem with evidence-related statutes (e.g.; The Foundations for
Evidence-Based Policymaking Act of 2018, which emphasizes collaboration and coordination to advance
data and evidence-building functions in the Federal government). The Federal awarding agency should
also specify any requirements of award recipients' participation in a federally funded evaluation, and any
evaluation activities required to be conducted by the Federal award.

§ 200.302 Financial management.
(a) Each state must expend and account for the Federal award in accordance with state laws and procedures
for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal
entity's financial management systems, including records documenting compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award, must be sufficient to permit the
preparation of reports required by general and program-specific terms and conditions; and the tracing of
funds to a level of expenditures adequate to establish that such funds have been used according to the
Federal statutes, regulations, and the terms and conditions of the Federal award. See also § 200.450.
(b) The financial management system of each non-Federal entity must provide for the following (see also §§
200.334, 200.335, 200.336, and 200.337):
(1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs
under which they were received. Federal program and Federal award identification must include, as
applicable, the Assistance Listings title and number, Federal award identification number and year,
name of the Federal agency, and name of the pass-through entity, if any.
(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program
in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. If a Federal
awarding agency requires reporting on an accrual basis from a recipient that maintains its records
on other than an accrual basis, the recipient must not be required to establish an accrual accounting
system. This recipient may develop accrual data for its reports on the basis of an analysis of the
documentation on hand. Similarly, a pass-through entity must not require a subrecipient to establish
an accrual accounting system and must allow the subrecipient to develop accrual data for its reports
on the basis of an analysis of the documentation on hand.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
These records must contain information pertaining to Federal awards, authorizations, financial
obligations, unobligated balances, assets, expenditures, income and interest and be supported by
source documentation.
(4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal
entity must adequately safeguard all assets and assure that they are used solely for authorized
purposes. See § 200.303.
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(5) Comparison of expenditures with budget amounts for each Federal award.
(6) Written procedures to implement the requirements of § 200.305.
(7) Written procedures for determining the allowability of costs in accordance with subpart E of this part
and the terms and conditions of the Federal award.

§ 200.303 Internal controls.
The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides reasonable
assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the
Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
(b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the
Federal awards.
(c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and
conditions of Federal awards.
(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in
audit findings.
(e) Take reasonable measures to safeguard protected personally identifiable information and other
information the Federal awarding agency or pass-through entity designates as sensitive or the nonFederal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding
privacy and responsibility over confidentiality.

§ 200.304 Bonds.
The Federal awarding agency may include a provision on bonding, insurance, or both in the following
circumstances:
(a) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient,
the Federal awarding agency, at its discretion, may require adequate bonding and insurance if the bonding
and insurance requirements of the non-Federal entity are not deemed adequate to protect the interest of
the Federal Government.
(b) The Federal awarding agency may require adequate fidelity bond coverage where the non-Federal entity
lacks sufficient coverage to protect the Federal Government's interest.
(c) Where bonds are required in the situations described above, the bonds must be obtained from companies
holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223.

§ 200.305 Federal payment.
(a) For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA)
agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM)
4A–2000, “Overall Disbursing Rules for All Federal Agencies”.
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(b) For non-Federal entities other than states, payments methods must minimize the time elapsing between
the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by
the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or
redemption of checks, warrants, or payment by other means. See also § 200.302(b)(6). Except as noted
elsewhere in this part, Federal agencies must require recipients to use only OMB-approved,
governmentwide information collection requests to request payment.
(1) The non-Federal entity must be paid in advance, provided it maintains or demonstrates the
willingness to maintain both written procedures that minimize the time elapsing between the
transfer of funds and disbursement by the non-Federal entity, and financial management systems
that meet the standards for fund control and accountability as established in this part. Advance
payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to
be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying
out the purpose of the approved program or project. The timing and amount of advance payments
must be as close as is administratively feasible to the actual disbursements by the non-Federal
entity for direct program or project costs and the proportionate share of any allowable indirect costs.
The non-Federal entity must make timely payment to contractors in accordance with the contract
provisions.
(2) Whenever possible, advance payments must be consolidated to cover anticipated cash needs for all
Federal awards made by the Federal awarding agency to the recipient.
(i)

Advance payment mechanisms include, but are not limited to, Treasury check and electronic
funds transfer and must comply with applicable guidance in 31 CFR part 208.

(ii) Non-Federal entities must be authorized to submit requests for advance payments and
reimbursements at least monthly when electronic fund transfers are not used, and as often as
they like when electronic transfers are used, in accordance with the provisions of the Electronic
Fund Transfer Act (15 U.S.C. 1693–1693r).
(3) Reimbursement is the preferred method when the requirements in this paragraph (b) cannot be met,
when the Federal awarding agency sets a specific condition per § 200.208, or when the non-Federal
entity requests payment by reimbursement. This method may be used on any Federal award for
construction, or if the major portion of the construction project is accomplished through private
market financing or Federal loans, and the Federal award constitutes a minor portion of the project.
When the reimbursement method is used, the Federal awarding agency or pass-through entity must
make payment within 30 calendar days after receipt of the billing, unless the Federal awarding
agency or pass-through entity reasonably believes the request to be improper.
(4) If the non-Federal entity cannot meet the criteria for advance payments and the Federal awarding
agency or pass-through entity has determined that reimbursement is not feasible because the nonFederal entity lacks sufficient working capital, the Federal awarding agency or pass-through entity
may provide cash on a working capital advance basis. Under this procedure, the Federal awarding
agency or pass-through entity must advance cash payments to the non-Federal entity to cover its
estimated disbursement needs for an initial period generally geared to the non-Federal entity's
disbursing cycle. Thereafter, the Federal awarding agency or pass-through entity must reimburse the
non-Federal entity for its actual cash disbursements. Use of the working capital advance method of
payment requires that the pass-through entity provide timely advance payments to any subrecipients
in order to meet the subrecipient's actual cash disbursements. The working capital advance method

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of payment must not be used by the pass-through entity if the reason for using this method is the
unwillingness or inability of the pass-through entity to provide timely advance payments to the
subrecipient to meet the subrecipient's actual cash disbursements.
(5) To the extent available, the non-Federal entity must disburse funds available from program income
(including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries,
and interest earned on such funds before requesting additional cash payments.
(6) Unless otherwise required by Federal statutes, payments for allowable costs by non-Federal entities
must not be withheld at any time during the period of performance unless the conditions of §
200.208, subpart D of this part, including § 200.339, or one or more of the following applies:
(i)

The non-Federal entity has failed to comply with the project objectives, Federal statutes,
regulations, or the terms and conditions of the Federal award.

(ii) The non-Federal entity is delinquent in a debt to the United States as defined in OMB Circular
A–129, “Policies for Federal Credit Programs and Non-Tax Receivables.” Under such conditions,
the Federal awarding agency or pass-through entity may, upon reasonable notice, inform the
non-Federal entity that payments must not be made for financial obligations incurred after a
specified date until the conditions are corrected or the indebtedness to the Federal Government
is liquidated.
(iii) A payment withheld for failure to comply with Federal award conditions, but without suspension
of the Federal award, must be released to the non-Federal entity upon subsequent compliance.
When a Federal award is suspended, payment adjustments will be made in accordance with §
200.343.
(iv) A payment must not be made to a non-Federal entity for amounts that are withheld by the nonFederal entity from payment to contractors to assure satisfactory completion of work. A
payment must be made when the non-Federal entity actually disburses the withheld funds to
the contractors or to escrow accounts established to assure satisfactory completion of work.
(7) Standards governing the use of banks and other institutions as depositories of advance payments
under Federal awards are as follows.
(i)

The Federal awarding agency and pass-through entity must not require separate depository
accounts for funds provided to a non-Federal entity or establish any eligibility requirements for
depositories for funds provided to the non-Federal entity. However, the non-Federal entity must
be able to account for funds received, obligated, and expended.

(ii) Advance payments of Federal funds must be deposited and maintained in insured accounts
whenever possible.
(8) The non-Federal entity must maintain advance payments of Federal awards in interest-bearing
accounts, unless the following apply:
(i)

The non-Federal entity receives less than $250,000 in Federal awards per year.

(ii) The best reasonably available interest-bearing account would not be expected to earn interest
in excess of $500 per year on Federal cash balances.
(iii) 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.
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(iv) A foreign government or banking system prohibits or precludes interest-bearing accounts.
(9) Interest earned amounts up to $500 per year may be retained by the non-Federal entity for
administrative expense. Any additional interest earned on Federal advance payments deposited in
interest-bearing accounts must be remitted annually to the Department of Health and Human
Services Payment Management System (PMS) through an electronic medium using either
Automated Clearing House (ACH) network or a Fedwire Funds Service payment.
(i)

For returning interest on Federal awards paid through PMS, the refund should:
(A) Provide an explanation stating that the refund is for interest;
(B) List the PMS Payee Account Number(s) (PANs);
(C) List the Federal award number(s) for which the interest was earned; and
(D) Make returns payable to: Department of Health and Human Services.

(ii) For returning interest on Federal awards not paid through PMS, the refund should:
(A) Provide an explanation stating that the refund is for interest;
(B) Include the name of the awarding agency;
(C) List the Federal award number(s) for which the interest was earned; and
(D) Make returns payable to: Department of Health and Human Services.
(10) Funds, principal, and excess cash returns must be directed to the original Federal agency payment
system. The non-Federal entity should review instructions from the original Federal agency payment
system. Returns should include the following information:
(i)

Payee Account Number (PAN), if the payment originated from PMS, or Agency information to
indicate whom to credit the funding if the payment originated from ASAP, NSF, or another
Federal agency payment system.

(ii) PMS document number and subaccount(s), if the payment originated from PMS, or relevant
account numbers if the payment originated from another Federal agency payment system.
(iii) The reason for the return (e.g., excess cash, funds not spent, interest, part interest part other,
etc.)
(11) When returning funds or interest to PMS you must include the following as applicable:
(i)

For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit Gateway—ACH Receiver St. Paul, MN

(ii) For Fedwire Returns1:
Routing Number: 021030004
Account number: 75010501
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Bank Name and Location: Federal Reserve Bank Treas NYC/Funds Transfer Division New York,
NY
1

Please note that the organization initiating payment is likely to incur a charge from their
Financial Institution for this type of payment.
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street, New York, NY 10013 USA
Payment Details (Line 70): Agency Locator Code (ALC): 75010501
Name (abbreviated when possible) and ALC Agency POC
(iv) For recipients that do not have electronic remittance capability, please make check2 payable to:
“The Department of Health and Human Services.”
Mail Check to Treasury approved lockbox:
HHS Program Support Center, P.O. Box 530231, Atlanta, GA 30353–0231
2

Please allow 4–6 weeks for processing of a payment by check to be applied to the
appropriate PMS account.
(v) Questions can be directed to PMS at 877–614–5533 or PMSSupport@psc.hhs.gov.

§ 200.306 Cost sharing or matching.
(a) Under Federal research proposals, voluntary committed cost sharing is not expected. It cannot be used as
a factor during the merit review of applications or proposals, but may be considered if it is both in
accordance with Federal awarding agency regulations and specified in a notice of funding opportunity.
Criteria for considering voluntary committed cost sharing and any other program policy factors that may
be used to determine who may receive a Federal award must be explicitly described in the notice of
funding opportunity. See also §§ 200.414 and 200.204 and appendix I to this part.
(b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and thirdparty in-kind contributions, must be accepted as part of the non-Federal entity's cost sharing or matching
when such contributions meet all of the following criteria:
(1) Are verifiable from the non-Federal entity's records;
(2) Are not included as contributions for any other Federal award;
(3) Are necessary and reasonable for accomplishment of project or program objectives;
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(4) Are allowable under subpart E of this part;
(5) Are not paid by the Federal Government under another Federal award, except where the Federal
statute authorizing a program specifically provides that Federal funds made available for such
program can be applied to matching or cost sharing requirements of other Federal programs;
(6) Are provided for in the approved budget when required by the Federal awarding agency; and
(7) Conform to other provisions of this part, as applicable.
(c) Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part
of cost sharing or matching only with the prior approval of the Federal awarding agency. Unrecovered
indirect cost means the difference between the amount charged to the Federal award and the amount
which could have been charged to the Federal award under the non-Federal entity's approved negotiated
indirect cost rate.
(d) Values for non-Federal entity contributions of services and property must be established in accordance
with the cost principles in subpart E of this part. If a Federal awarding agency authorizes the non-Federal
entity to donate buildings or land for construction/facilities acquisition projects or long-term use, the
value of the donated property for cost sharing or matching must be the lesser of paragraph (d)(1) or (2) of
this section.
(1) The value of the remaining life of the property recorded in the non-Federal entity's accounting records
at the time of donation.
(2) The current fair market value. However, when there is sufficient justification, the Federal awarding
agency may approve the use of the current fair market value of the donated property, even if it
exceeds the value described in paragraph (d)(1) of this section at the time of donation.
(e) Volunteer services furnished by third-party 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 third-party volunteer services must be
consistent with those paid for similar work by the non-Federal entity. In those instances in which the
required skills are not found in the non-Federal entity, rates must be consistent with those paid for similar
work in the labor market in which the non-Federal entity competes for the kind of services involved. In
either case, paid fringe benefits that are reasonable, necessary, allocable, and otherwise allowable may be
included in the valuation.
(f) When a third-party organization furnishes the services of an employee, these services must be valued at
the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary,
allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved
federally-negotiated indirect cost rate or, a rate in accordance with § 200.414(d) provided these services
employ the same skill(s) for which the employee is normally paid. Where donated services are treated as
indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement
for the donated services will not be made.
(g) Donated property from third parties may include such items as equipment, office supplies, laboratory
supplies, or workshop and classroom supplies. Value assessed to donated property included in the cost
sharing or matching share must not exceed the fair market value of the property at the time of the
donation.

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(h) The method used for determining cost sharing or matching for third-party-donated equipment, buildings
and land for which title passes to the non-Federal entity may differ according to the purpose of the
Federal award, if paragraph (h)(1) or (2) of this section applies.
(1) If the purpose of the Federal award is to assist the non-Federal entity in the acquisition of equipment,
buildings or land, the aggregate value of the donated property may be claimed as cost sharing or
matching.
(2) If the purpose of the Federal award is to support activities that require the use of equipment,
buildings or land, normally only depreciation charges for equipment and buildings may be made.
However, the fair market value of equipment or other capital assets and fair rental charges for land
may be allowed, provided that the Federal awarding agency has approved the charges. See also §
200.420.
(i)

The value of donated property must be determined in accordance with the usual accounting policies of
the non-Federal entity, with the following qualifications:
(1) The value of donated land and buildings must not exceed its fair market value at the time of donation
to the non-Federal entity as established by an independent appraiser (e.g., certified real property
appraiser or General Services Administration representative) and certified by a responsible official of
the non-Federal entity as required by the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601–4655) (Uniform Act) except as
provided in the implementing regulations at 49 CFR part 24, “Uniform Relocation Assistance And
Real Property Acquisition For Federal And Federally-Assisted Programs”.
(2) The value of donated equipment must not exceed the fair market value of equipment of the same
age and condition at the time of donation.
(3) The value of donated space must 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.
(4) The value of loaned equipment must not exceed its fair rental value.

(j)

For third-party in-kind contributions, the fair market value of goods and services must be documented and
to the extent feasible supported by the same methods used internally by the non-Federal entity.

(k) For IHEs, see also OMB memorandum M–01–06, dated January 5, 2001, Clarification of OMB A–21
Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs.

§ 200.307 Program income.
(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate.
(b) Cost of generating program income. If authorized by Federal regulations or the Federal award, costs
incidental to the generation of program income may be deducted from gross income to determine
program income, provided these costs have not been charged to the Federal award.
(c) Governmental revenues. Taxes, special assessments, levies, fines, and other such revenues raised by a
non-Federal entity are not program income unless the revenues are specifically identified in the Federal
award or Federal awarding agency regulations as program income.

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(d) Property. Proceeds from the sale of real property, equipment, or supplies are not program income; such
proceeds will be handled in accordance with the requirements of the Property Standards §§ 200.311,
200.313, and 200.314, or as specifically identified in Federal statutes, regulations, or the terms and
conditions of the Federal award.
(e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms
and conditions of the Federal award, or give prior approval for how program income is to be used,
paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research
institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions
of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In
specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may
distinguish between income earned by the recipient and income earned by subrecipients and between the
sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in
paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also
be deducted from expenditures.
(1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the
net allowable costs. Program income must be used for current costs unless the Federal awarding
agency authorizes otherwise. Program income that the non-Federal entity did not anticipate at the
time of the Federal award must be used to reduce the Federal award and non-Federal entity
contributions rather than to increase the funds committed to the project.
(2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research
institutions, as described in this paragraph (e)) program income may be added to the Federal award
by the Federal agency and the non-Federal entity. The program income must be used for the
purposes and under the conditions of the Federal award.
(3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may
be used to meet the cost sharing or matching requirement of the Federal award. The amount of the
Federal award remains the same.
(f) Income after the period of performance. There are no Federal requirements governing the disposition of
income earned after the end of the period of performance for the Federal award, unless the Federal
awarding agency regulations or the terms and conditions of the Federal award provide otherwise. The
Federal awarding agency may negotiate agreements with recipients regarding appropriate uses of income
earned after the period of performance as part of the grant closeout process. See also § 200.344.
(g) License fees and royalties. Unless the Federal statute, regulations, or terms and conditions for the Federal
award provide otherwise, the non-Federal entity is not accountable to the Federal awarding agency with
respect to program income earned from license fees and royalties for copyrighted material, patents,
patent applications, trademarks, and inventions made under a Federal award to which 37 CFR part 401 is
applicable.

§ 200.308 Revision of budget and program plans.
(a) The approved budget for the Federal award summarizes the financial aspects of the project or program as
approved during the Federal award process. It may include either the Federal and non-Federal share (see
definition for Federal share in § 200.1) or only the Federal share, depending upon Federal awarding agency
requirements. The budget and program plans include considerations for performance and program
evaluation purposes whenever required in accordance with the terms and conditions of the award.

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(b) Recipients are required to report deviations from budget or project scope or objective, and request prior
approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this
section.
(c) For non-construction Federal awards, recipients must request prior approvals from Federal awarding
agencies for the following program or budget-related reasons:
(1) Change in the scope or the objective of the project or program (even if there is no associated budget
revision requiring prior written approval).
(2) Change in a key person specified in the application or the Federal award.
(3) The disengagement from the project for more than three months, or a 25 percent reduction in time
devoted to the project, by the approved project director or principal investigator.
(4) The inclusion, unless waived by the Federal awarding agency, of costs that require prior approval in
accordance with subpart E of this part as applicable.
(5) The transfer of funds budgeted for participant support costs to other categories of expense.
(6) Unless described in the application and funded in the approved Federal awards, the subawarding,
transferring or contracting out of any work under a Federal award, including fixed amount subawards
as described in § 200.333. This provision does not apply to the acquisition of supplies, material,
equipment or general support services.
(7) Changes in the approved cost-sharing or matching provided by the non-Federal entity.
(8) The need arises for additional Federal funds to complete the project.
(d) No other prior approval requirements for specific items may be imposed unless an exception has been
approved by OMB. See also §§ 200.102 and 200.407.
(e) Except for requirements listed in paragraphs (c)(1) through (8) of this section, the Federal awarding
agency is authorized, at its option, to waive other cost-related and administrative prior written approvals
contained in subparts D and E of this part. Such waivers may include authorizing recipients to do any one
or more of the following:
(1) Incur project costs 90 calendar days before the Federal awarding agency makes the Federal award.
Expenses more than 90 calendar days pre-award require prior approval of the Federal awarding
agency. All costs incurred before the Federal awarding agency makes the Federal award are at the
recipient's risk (i.e., the Federal awarding agency is not required to reimburse such costs if for any
reason the recipient does not receive a Federal award or if the Federal award is less than anticipated
and inadequate to cover such costs). See also § 200.458.
(2) Initiate a one-time extension of the period of performance by up to 12 months unless one or more of
the conditions outlined in paragraphs (e)(2)(i) through (iii) of this section apply. For one-time
extensions, the recipient must notify the Federal awarding agency in writing with the supporting
reasons and revised period of performance at least 10 calendar days before the end of the period of
performance specified in the Federal award. This one-time extension must not be exercised merely
for the purpose of using unobligated balances. Extensions require explicit prior Federal awarding
agency approval when:
(i)

The terms and conditions of the Federal award prohibit the extension.

(ii) The extension requires additional Federal funds.
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(iii) The extension involves any change in the approved objectives or scope of the project.
(3) Carry forward unobligated balances to subsequent budget periods.
(4) For Federal awards that support research, unless the Federal awarding agency provides otherwise in
the Federal award or in the Federal awarding agency's regulations, the prior approval requirements
described in this paragraph (e) are automatically waived (i.e., recipients need not obtain such prior
approvals) unless one of the conditions included in paragraph (e)(2) of this section applies.
(f) The Federal awarding agency may, at its option, restrict the transfer of funds among direct cost categories
or programs, functions and activities for Federal awards in which the Federal share of the project exceeds
the simplified acquisition threshold and the cumulative amount of such transfers exceeds or is expected
to exceed 10 percent of the total budget as last approved by the Federal awarding agency. The Federal
awarding agency cannot permit a transfer that would cause any Federal appropriation to be used for
purposes other than those consistent with the appropriation.
(g) All other changes to non-construction budgets, except for the changes described in paragraph (c) of this
section, do not require prior approval (see also § 200.407).
(h) For construction Federal awards, the recipient must request prior written approval promptly from the
Federal awarding agency for budget revisions whenever paragraph (h)(1), (2), or (3) of this section
applies:
(1) The revision results from changes in the scope or the objective of the project or program.
(2) The need arises for additional Federal funds to complete the project.
(3) A revision is desired which involves specific costs for which prior written approval requirements may
be imposed consistent with applicable OMB cost principles listed in subpart E.
(4) No other prior approval requirements for budget revisions may be imposed unless an exception has
been approved by OMB.
(5) When a Federal awarding agency makes a Federal award that provides support for construction and
non-construction work, the Federal awarding agency may require the recipient to obtain prior
approval from the Federal awarding agency before making any fund or budget transfers between the
two types of work supported.
(i)

When requesting approval for budget revisions, the recipient must use the same format for budget
information that was used in the application, unless the Federal awarding agency indicates a letter of
request suffices.

(j)

Within 30 calendar days from the date of receipt of the request for budget revisions, the Federal awarding
agency must review the request and notify the recipient whether the budget revisions have been
approved. If the revision is still under consideration at the end of 30 calendar days, the Federal awarding
agency must inform the recipient in writing of the date when the recipient may expect the decision.

§ 200.309 Modifications to Period of Performance.
If a Federal awarding agency or pass-through entity approves an extension, or if a recipient extends under §
200.308(e)(2), the Period of Performance will be amended to end at the completion of the extension. If a
termination occurs, the Period of Performance will be amended to end upon the effective date of termination. If a
renewal award is issued, a distinct Period of Performance will begin.

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PROPERTY STANDARDS
§ 200.310 Insurance coverage.
The non-Federal entity must, at a minimum, provide the equivalent insurance coverage for real property and
equipment acquired or improved with Federal funds as provided to property owned by the non-Federal entity.
Federally-owned property need not be insured unless required by the terms and conditions of the Federal award.

§ 200.311 Real property.
(a) Title. Subject to the requirements and conditions set forth in this section, title to real property acquired or
improved under a Federal award will vest upon acquisition in the non-Federal entity.
(b) Use. Except as otherwise provided by Federal statutes or by the Federal awarding agency, real property
will be used for the originally authorized purpose as long as needed for that purpose, during which time
the non-Federal entity must 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 non-Federal
entity must obtain disposition instructions from the Federal awarding agency or pass-through entity. The
instructions must provide for one of the following alternatives:
(1) Retain title after compensating the Federal awarding agency. The amount paid to the Federal
awarding agency will be computed by applying the Federal awarding agency's percentage of
participation in the cost of the original purchase (and costs of any improvements) to the fair market
value of the property. However, in those situations where the non-Federal entity is disposing of real
property acquired or improved with a Federal award and acquiring replacement real property under
the same Federal award, the net proceeds from the disposition may be used as an offset to the cost
of the replacement property.
(2) Sell the property and compensate the Federal awarding agency. The amount due to the Federal
awarding agency will be calculated by applying the Federal awarding agency's percentage of
participation in the cost of the original purchase (and cost of any improvements) to the proceeds of
the sale after deduction of any actual and reasonable selling and fixing-up expenses. If the Federal
award has not been closed out, the net proceeds from sale may be offset against the original cost of
the property. When the non-Federal entity 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 title to the Federal awarding agency or to a third party designated/approved by the Federal
awarding agency. The non-Federal entity is entitled to be paid an amount calculated by applying the
non-Federal entity's percentage of participation in the purchase of the real property (and cost of any
improvements) to the current fair market value of the property.

§ 200.312 Federally-owned and exempt property.
(a) Title to federally-owned property remains vested in the Federal Government. The non-Federal entity must
submit annually an inventory listing of federally-owned property in its custody to the Federal awarding
agency. Upon completion of the Federal award or when the property is no longer needed, the non-Federal
entity must report the property to the Federal awarding agency for further Federal agency utilization.

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(b) If the Federal awarding agency has no further need for the property, it must declare the property excess
and report it for disposal to the appropriate Federal disposal authority, unless the Federal awarding
agency has statutory authority to dispose of the property by alternative methods (e.g., the authority
provided by the Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to donate research equipment to
educational and nonprofit organizations in accordance with Executive Order 12999, “Educational
Technology: Ensuring Opportunity for All Children in the Next Century.”). The Federal awarding agency
must issue appropriate instructions to the non-Federal entity.
(c) Exempt property means property acquired under a Federal award where the Federal awarding agency has
chosen to vest title to the property to the non-Federal entity without further responsibility to the Federal
Government, based upon the explicit terms and conditions of the Federal award. The Federal awarding
agency may exercise this option when statutory authority exists. Absent statutory authority and specific
terms and conditions of the Federal award, title to exempt property acquired under the Federal award
remains with the Federal Government.

§ 200.313 Equipment.
See also § 200.439.
(a) Title. Subject to the requirements and conditions set forth in this section, title to equipment acquired
under a Federal award will vest upon acquisition in the non-Federal entity. Unless a statute specifically
authorizes the Federal agency to vest title in the non-Federal entity without further responsibility to the
Federal Government, and the Federal agency elects to do so, the title must be a conditional title. Title
must vest in the non-Federal entity subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance, or
until the property is no longer needed for the purposes of the project.
(2) Not encumber the property without approval of the Federal awarding agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A state must use, manage and dispose of equipment acquired under a Federal award by the state
in accordance with state laws and procedures. Other non-Federal entities must follow paragraphs (c)
through (e) of this section.
(c) Use.
(1) Equipment must be used by the non-Federal entity 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 the Federal
award, and the non-Federal entity must not encumber the property without prior approval of the
Federal awarding agency. The Federal awarding agency may require the submission of the
applicable common form for equipment. When no longer needed for the original program or project,
the equipment may be used in other activities supported by the Federal awarding agency, in the
following order of priority:
(i)

Activities under a Federal award from the Federal awarding agency which funded the original
program or project, then

(ii) Activities under Federal awards from other Federal awarding agencies. This includes
consolidated equipment for information technology systems.

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(2) During the time that equipment is used on the project or program for which it was acquired, the nonFederal entity must also make equipment available for use on other projects or programs currently or
previously supported by the Federal Government, provided that such use will not interfere with the
work on the projects or program for which it was originally acquired. First preference for other use
must be given to other programs or projects supported by Federal awarding agency that financed the
equipment and second preference must be given to programs or projects under Federal awards from
other Federal awarding agencies. Use for non-federally-funded programs or projects is also
permissible. User fees should be considered if appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the non-Federal entity
must not use equipment acquired with the Federal award to provide services for a fee that is less
than private companies charge for equivalent services unless specifically authorized by Federal
statute for as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the non-Federal entity may use the equipment to be
replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement
property.
(d) Management requirements. Procedures for managing equipment (including replacement equipment),
whether acquired in whole or in part under a Federal award, until disposition takes place will, 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 funding for the property (including the FAIN), who holds
title, the acquisition date, and cost of the property, percentage of Federal participation in the project
costs for the Federal award under which the property was acquired, the location, use and condition
of the property, and any ultimate disposition data including the date of disposal and sale price of the
property.
(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 be developed to ensure adequate safeguards to prevent loss, damage, or
theft of the property. Any loss, damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good condition.
(5) If the non-Federal entity 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 Federal award is no longer needed
for the original project or program or for other activities currently or previously supported by a Federal
awarding agency, except as otherwise provided in Federal statutes, regulations, or Federal awarding
agency disposition instructions, the non-Federal entity must request disposition instructions from the
Federal awarding agency if required by the terms and conditions of the Federal award. Disposition of the
equipment will be made as follows, in accordance with Federal awarding agency disposition instructions:
(1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold
or otherwise disposed of with no further responsibility to the Federal awarding agency.
(2) Except as provided in § 200.312(b), or if the Federal awarding agency fails to provide requested
disposition instructions within 120 days, items of equipment with a current per-unit fair market value
in excess of $5,000 may be retained by the non-Federal entity or sold. The Federal awarding agency
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is entitled to an amount calculated by multiplying the current market value or proceeds from sale by
the Federal awarding agency's percentage of participation in the cost of the original purchase. If the
equipment is sold, the Federal awarding agency may permit the non-Federal entity to deduct and
retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for its selling
and handling expenses.
(3) The non-Federal entity may transfer title to the property to the Federal Government or to an eligible
third party provided that, in such cases, the non-Federal entity must be entitled to compensation for
its attributable percentage of the current fair market value of the property.
(4) In cases where a non-Federal entity fails to take appropriate disposition actions, the Federal
awarding agency may direct the non-Federal entity to take disposition actions.

§ 200.314 Supplies.
See also § 200.453.
(a) Title to supplies will vest in the non-Federal entity upon acquisition. If there is a residual inventory of
unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project
or program and the supplies are not needed for any other Federal award, the non-Federal entity must
retain the supplies for use on other activities or sell them, but must, in either case, compensate the
Federal Government for its share. The amount of compensation must be computed in the same manner
as for equipment. See § 200.313 (e)(2) for the calculation methodology.
(b) As long as the Federal Government retains an interest in the supplies, the non-Federal entity must not use
supplies acquired under a Federal award to provide services to other organizations for a fee that is less
than private companies charge for equivalent services, unless specifically authorized by Federal statute.

§ 200.315 Intangible property.
(a) Title to intangible property (see definition for Intangible property in § 200.1) acquired under a Federal
award vests upon acquisition in the non-Federal entity. The non-Federal entity must use that property for
the originally-authorized purpose, and must not encumber the property without approval of the Federal
awarding agency. When no longer needed for the originally authorized purpose, disposition of the
intangible property must occur in accordance with the provisions in § 200.313(e).
(b) The non-Federal entity may copyright any work that is subject to copyright and was developed, or for
which ownership was acquired, under a Federal award. The Federal awarding agency reserves a royaltyfree, nonexclusive and irrevocable right to reproduce, publish, or otherwise use the work for Federal
purposes, and to authorize others to do so.
(c) The non-Federal entity is subject to applicable regulations governing patents and inventions, including
governmentwide regulations issued by the Department of Commerce at 37 CFR part 401, “Rights to
Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Awards,
Contracts and Cooperative Agreements.”
(d) The Federal Government has the right to:
(1) Obtain, reproduce, publish, or otherwise use the data produced under a Federal award; and
(2) Authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes.
(e)
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(1) In response to a Freedom of Information Act (FOIA) request for research data relating to published
research findings produced under a Federal award that were used by the Federal Government in
developing an agency action that has the force and effect of law, the Federal awarding agency must
request, and the non-Federal entity must provide, within a reasonable time, the research data so that
they can be made available to the public through the procedures established under the FOIA. If the
Federal awarding agency obtains the research data solely in response to a FOIA request, the Federal
awarding agency may charge the requester a reasonable fee equaling the full incremental cost of
obtaining the research data. This fee should reflect costs incurred by the Federal agency and the
non-Federal entity. This fee is in addition to any fees the Federal awarding agency may assess under
the FOIA (5 U.S.C. 552(a)(4)(A)).
(2) Published research findings means when:
(i)

Research findings are published in a peer-reviewed scientific or technical journal; or

(ii) A Federal agency publicly and officially cites the research findings in support of an agency
action that has the force and effect of law. “Used by the Federal Government in developing an
agency action that has the force and effect of law” is defined as when an agency publicly and
officially cites the research findings in support of an agency action that has the force and effect
of law.
(3) Research data means the recorded factual material commonly accepted in the scientific community
as necessary to validate research findings, but not any of the following: Preliminary analyses, drafts
of scientific papers, plans for future research, peer reviews, or communications with colleagues. This
“recorded” material excludes physical objects (e.g., laboratory samples). Research data also do not
include:
(i)

Trade secrets, commercial information, materials necessary to be held confidential by a
researcher until they are published, or similar information which is protected under law; and

(ii) Personnel and medical information and similar information the disclosure of which would
constitute a clearly unwarranted invasion of personal privacy, such as information that could be
used to identify a particular person in a research study.

§ 200.316 Property trust relationship.
Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held
in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property
was acquired or improved. The Federal awarding agency may require the non-Federal entity to record liens or other
appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal
award and that use and disposition conditions apply to the property.

PROCUREMENT STANDARDS
§ 200.317 Procurements by states.
When procuring property and services under a Federal award, a State must follow the same policies and procedures
it uses for procurements from its non-Federal funds. The State will comply with §§ 200.321, 200.322, and 200.323
and ensure that every purchase order or other contract includes any clauses required by § 200.327. All other nonFederal entities, including subrecipients of a State, must follow the procurement standards in §§ 200.318 through
200.327.
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§ 200.318 General procurement standards.
(a) The non-Federal entity must have and use documented procurement procedures, consistent with State,
local, and tribal laws and regulations and the standards of this section, for the acquisition of property or
services required under a Federal award or subaward. The non-Federal entity's documented procurement
procedures must conform to the procurement standards identified in §§ 200.317 through 200.327.
(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the
terms, conditions, and specifications of their contracts or purchase orders.
(c)
(1) The non-Federal entity must maintain written standards of conduct covering conflicts of interest and
governing the actions of its employees engaged in the selection, award and administration of
contracts. No employee, officer, or agent may participate in the selection, award, or administration of
a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such
a conflict of interest would arise when the employee, officer, or agent, any member of his or her
immediate family, his or her partner, or an organization which employs or is about to employ any of
the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a
firm considered for a contract. The officers, employees, and agents of the non-Federal entity may
neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties
to subcontracts. However, non-Federal entities may set standards for situations in which the
financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards
of conduct must provide for disciplinary actions to be applied for violations of such standards by
officers, employees, or agents of the non-Federal entity.
(2) If the non-Federal entity has a parent, affiliate, or subsidiary organization that is not a State, local
government, or Indian tribe, the non-Federal entity must also maintain written standards of conduct
covering organizational conflicts of interest. Organizational conflicts of interest means that because
of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity is
unable or appears to be unable to be impartial in conducting a procurement action involving a
related organization.
(d) The non-Federal entity's procedures must avoid acquisition 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.
(e) To foster greater economy and efficiency, and in accordance with efforts to promote cost-effective use of
shared services across the Federal Government, the non-Federal entity is encouraged to enter into state
and local intergovernmental agreements or inter-entity agreements where appropriate for procurement or
use of common or shared goods and services. Competition requirements will be met with documented
procurement actions using strategic sourcing, shared services, and other similar procurement
arrangements.
(f) The non-Federal entity is encouraged to use Federal excess and surplus property in lieu of purchasing new
equipment and property whenever such use is feasible and reduces project costs.
(g) The non-Federal entity is 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.
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(h) The non-Federal entity must award contracts only to responsible contractors possessing the ability to
perform successfully under the terms and conditions of a proposed procurement. Consideration will be
given to such matters as contractor integrity, compliance with public policy, record of past performance,
and financial and technical resources. See also § 200.214.
(i)

The non-Federal entity must maintain records sufficient to detail the history of procurement. These
records will 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.

(j)
(1) The non-Federal entity may use a time-and-materials type contract only after a determination that no
other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its
own risk. Time-and-materials type contract means a contract whose cost to a non-Federal entity is
the sum of:
(i)

The actual cost of materials; and

(ii) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative
expenses, and profit.
(2) Since this formula generates an open-ended contract price, a time-and-materials contract provides
no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each
contract must set a ceiling price that the contractor exceeds at its own risk. Further, the non-Federal
entity awarding such a contract must assert a high degree of oversight in order to obtain reasonable
assurance that the contractor is using efficient methods and effective cost controls.
(k) The non-Federal entity alone must 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 non-Federal entity of any contractual responsibilities under its
contracts. The Federal awarding agency will not substitute its judgment for that of the non-Federal entity
unless the matter is primarily a Federal concern. Violations of law will be referred to the local, state, or
Federal authority having proper jurisdiction.
[85 FR 49543, Aug. 13, 2020, as amended at 86 FR 10440, Feb. 22, 2021]

§ 200.319 Competition.
(a) All procurement transactions for the acquisition of property or services required under a Federal award
must be conducted in a manner providing full and open competition consistent with the standards of this
section and § 200.320.
(b) In order to ensure objective contractor performance and eliminate unfair competitive advantage,
contractors that develop or draft specifications, requirements, statements of work, or invitations for bids
or requests for proposals must be excluded from competing for such procurements. Some of the
situations considered to be restrictive of competition include but are not limited to:
(1) Placing unreasonable requirements on firms in order for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
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(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and
describing the performance or other relevant requirements of the procurement; and
(7) Any arbitrary action in the procurement process.
(c) The non-Federal entity must conduct procurements in a manner that prohibits the use of statutorily or
administratively imposed state, local, or tribal 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 criterion provided its
application leaves an appropriate number of qualified firms, given the nature and size of the project, to
compete for the contract.
(d) The non-Federal entity must have written procedures for procurement transactions. These procedures
must ensure that all solicitations:
(1) Incorporate a clear and accurate description of the technical requirements for the material, product,
or service to be procured. Such description must 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, must 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 equivalent” description may be used as a means to define the performance or
other salient requirements of procurement. The specific features of the named brand which must be
met by offers must be clearly stated; and
(2) Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating
bids or proposals.
(e) The non-Federal entity must 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, the non-Federal entity must not preclude potential bidders from
qualifying during the solicitation period.
(f) Noncompetitive procurements can only be awarded in accordance with § 200.320(c).

§ 200.320 Methods of procurement to be followed.
The non-Federal entity must have and use documented procurement procedures, consistent with the standards of
this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the
acquisition of property or services required under a Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or services under a
Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower
threshold established by a non-Federal entity, formal procurement methods are not required. The non-

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Federal entity may use informal procurement methods to expedite the completion of its transactions and
minimize the associated administrative burden and cost. The informal methods used for procurement of
property or services at or below the SAT include:
(1) Micro-purchases —
(i)

Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does
not exceed the micro-purchase threshold (See the definition of micro-purchase in § 200.1). To
the maximum extent practicable, the non-Federal entity should distribute micro-purchases
equitably among qualified suppliers.

(ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price
or rate quotations if the non-Federal entity considers the price to be reasonable based on
research, experience, purchase history or other information and documents it files accordingly.
Purchase cards can be used for micro-purchases if procedures are documented and approved
by the non-Federal entity.
(iii) Micro-purchase thresholds. The non-Federal entity is responsible for determining and
documenting an appropriate micro-purchase threshold based on internal controls, an
evaluation of risk, and its documented procurement procedures. The micro-purchase threshold
used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal
laws or regulations. Non-Federal entities may establish a threshold higher than the Federal
threshold established in the Federal Acquisition Regulations (FAR) in accordance with
paragraphs (a)(1)(iv) and (v) of this section.
(iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities
may establish a threshold higher than the micro-purchase threshold identified in the FAR in
accordance with the requirements of this section. The non-Federal entity may self-certify a
threshold up to $50,000 on an annual basis and must maintain documentation to be made
available to the Federal awarding agency and auditors in accordance with § 200.334. The selfcertification must include a justification, clear identification of the threshold, and supporting
documentation of any of the following:
(A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the
most recent audit;
(B) An annual internal institutional risk assessment to identify, mitigate, and manage financial
risks; or,
(C) For public institutions, a higher threshold consistent with State law.
(v) Non-Federal entity increase to the micro-purchase threshold over $50,000. Micro-purchase
thresholds higher than $50,000 must be approved by the cognizant agency for indirect costs.
The non-federal entity must submit a request with the requirements included in paragraph
(a)(1)(iv) of this section. The increased threshold is valid until there is a change in status in
which the justification was approved.
(2) Small purchases —

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(i)

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Small purchase procedures. The acquisition of property or services, the aggregate dollar
amount of which is higher than the micro-purchase threshold but does not exceed the
simplified acquisition threshold. If small purchase procedures are used, price or rate quotations
must be obtained from an adequate number of qualified sources as determined appropriate by
the non-Federal entity.

(ii) Simplified acquisition thresholds. The non-Federal entity is responsible for determining an
appropriate simplified acquisition threshold based on internal controls, an evaluation of risk
and its documented procurement procedures which must not exceed the threshold established
in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal
entity must be authorized or not prohibited under State, local, or tribal laws or regulations.
(b) Formal procurement methods. When the value of the procurement for property or services under a Federal
financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity,
formal procurement methods are required. Formal procurement methods require following documented
procedures. Formal procurement methods also require public advertising unless a non-competitive
procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following
formal methods of procurement are used for procurement of property or services above the simplified
acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity
determines to be appropriate:
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price
contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with
all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids
method is the preferred method for procuring construction, if the conditions.
(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 apply:
(A) Bids must be solicited from an adequate number of qualified sources, providing them
sufficient response time prior to the date set for opening the bids, for local, and tribal
governments, the invitation for bids must be publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent attachments,
must define the items or services in order for the bidder to properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for bids, and for
local and tribal governments, the bids must be opened publicly;
(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 must 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
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(E) Any or all bids may be rejected if there is a sound documented reason.
(2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract
is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed
bids. They are awarded in accordance with the following requirements:
(i)

Requests for proposals must be publicized and identify all evaluation factors and their relative
importance. Proposals must be solicited from an adequate number of qualified offerors. Any
response to publicized requests for proposals must be considered to the maximum extent
practical;

(ii) The non-Federal entity must have a written method for conducting technical evaluations of the
proposals received and making selections;
(iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to
the non-Federal entity, with price and other factors considered; and
(iv) The non-Federal entity may use competitive proposal procedures for qualifications-based
procurement of architectural/engineering (A/E) professional services whereby offeror's
qualifications are evaluated and the most qualified offeror 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 though A/E firms that are a potential source to perform the proposed
effort.
(c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can
be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances
apply:
(1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the
micro-purchase threshold (see paragraph (a)(1) of this section);
(2) The item is available only from a single source;
(3) The public exigency or emergency for the requirement will not permit a delay resulting from
publicizing a competitive solicitation;
(4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive
procurement in response to a written request from the non-Federal entity; or
(5) After solicitation of a number of sources, competition is determined inadequate.

§ 200.321 Contracting with small and minority businesses, women's business enterprises, and
labor surplus area firms.
(a) The non-Federal entity must take all necessary affirmative steps to assure that minority businesses,
women's business enterprises, and labor surplus area firms are used when possible.
(b) Affirmative steps must include:
(1) Placing qualified small and minority businesses and women's business enterprises on solicitation
lists;
(2) Assuring that small and minority businesses, and women's business enterprises are solicited
whenever they are potential sources;
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(3) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit
maximum participation by small and minority businesses, and women's business enterprises;
(4) Establishing delivery schedules, where the requirement permits, which encourage participation by
small and minority businesses, and women's business enterprises;
(5) Using the services and assistance, as appropriate, of such organizations as the Small Business
Administration and the Minority Business Development Agency of the Department of Commerce;
and
(6) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in
paragraphs (b)(1) through (5) of this section.

§ 200.322 Domestic preferences for procurements.
(a) As appropriate and to the extent consistent with law, the non-Federal entity should, to the greatest extent
practicable under a Federal award, provide a preference for the purchase, acquisition, or use of goods,
products, or materials produced in the United States (including but not limited to iron, aluminum, steel,
cement, and other manufactured products). The requirements of this section must be included in all
subawards including all contracts and purchase orders for work or products under this award.
(b) For purposes of this section:
(1) “Produced in the United States” means, for iron and steel products, that all manufacturing processes,
from the initial melting stage through the application of coatings, occurred in the United States.
(2) “Manufactured products” means items and construction materials composed in whole or in part of
non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl
chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.

§ 200.323 Procurement of recovered materials.
A non-Federal entity that is a state agency or agency of a political subdivision of a state and its contractors must
comply with section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act. The requirements of Section 6002 include procuring only items designated in guidelines of the Environmental
Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered materials practicable,
consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds
$10,000 or the value of the quantity acquired during the preceding fiscal year exceeded $10,000; procuring solid
waste management services in a manner that maximizes energy and resource recovery; and establishing an
affirmative procurement program for procurement of recovered materials identified in the EPA guidelines.

§ 200.324 Contract cost and price.
(a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action
in excess of the Simplified Acquisition Threshold including contract modifications. The method and
degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a
starting point, the non-Federal entity must make independent estimates before receiving bids or
proposals.

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(b) The non-Federal entity must 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 must 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.
(c) Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the
extent that costs incurred or cost estimates included in negotiated prices would be allowable for the nonFederal entity under subpart E of this part. The non-Federal entity may reference its own cost principles
that comply with the Federal cost principles.
(d) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not
be used.

§ 200.325 Federal awarding agency or pass-through entity review.
(a) The non-Federal entity must make available, upon request of the Federal awarding agency or pass-through
entity, technical specifications on proposed procurements where the Federal awarding agency or passthrough entity believes such review is needed to ensure that the item or service specified is the one being
proposed for acquisition. This review generally will take place prior to the time the specification is
incorporated into a solicitation document. However, if the non-Federal entity desires to have the review
accomplished after a solicitation has been developed, the Federal awarding agency or pass-through entity
may still review the specifications, with such review usually limited to the technical aspects of the
proposed purchase.
(b) The non-Federal entity must make available upon request, for the Federal awarding agency or passthrough entity pre-procurement review, procurement documents, such as requests for proposals or
invitations for bids, or independent cost estimates, when:
(1) The non-Federal entity's procurement procedures or operation fails to comply with the procurement
standards in this part;
(2) The procurement is expected to exceed the Simplified Acquisition Threshold and is to be awarded
without competition or only one bid or offer is received in response to a solicitation;
(3) The procurement, which is expected to exceed the Simplified Acquisition Threshold, specifies a
“brand name” product;
(4) The proposed contract is more than the Simplified Acquisition Threshold and is to be awarded to
other than the apparent low bidder under a sealed bid procurement; or
(5) A proposed contract modification changes the scope of a contract or increases the contract amount
by more than the Simplified Acquisition Threshold.
(c) The non-Federal entity is exempt from the pre-procurement review in paragraph (b) of this section if the
Federal awarding agency or pass-through entity determines that its procurement systems comply with the
standards of this part.
(1) The non-Federal entity may request that its procurement system be reviewed by the Federal awarding
agency or pass-through entity to determine whether its system meets these standards in order for its
system to be certified. Generally, these reviews must occur where there is continuous high-dollar
funding, and third-party contracts are awarded on a regular basis;
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(2) The non-Federal entity may self-certify its procurement system. Such self-certification must not limit
the Federal awarding agency's right to survey the system. Under a self-certification procedure, the
Federal awarding agency may rely on written assurances from the non-Federal entity that it is
complying with these standards. The non-Federal entity must cite specific policies, procedures,
regulations, or standards as being in compliance with these requirements and have its system
available for review.

§ 200.326 Bonding requirements.
For construction or facility improvement contracts or subcontracts exceeding the Simplified Acquisition Threshold,
the Federal awarding agency or pass-through entity may accept the bonding policy and requirements of the nonFederal entity provided that the Federal awarding agency or pass-through entity has made a determination that the
Federal interest is adequately protected. If such a determination has not been made, the minimum requirements
must be as follows:
(a) A bid guarantee from each bidder equivalent to five percent of the bid price. The “bid guarantee” must
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 the bid, execute such
contractual documents as may be required within the time specified.
(b) 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
requirements under such contract.
(c) 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.

§ 200.327 Contract provisions.
The non-Federal entity's contracts must contain the applicable provisions described in appendix II to this part.

PERFORMANCE AND FINANCIAL MONITORING AND REPORTING
§ 200.328 Financial reporting.
Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved
governmentwide data elements for collection of financial information (at time of publication the Federal Financial
Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated
standards lead. This information must be collected with the frequency required by the terms and conditions of the
Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual
circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal
award or could significantly affect program outcomes, and preferably in coordination with performance reporting.
The Federal awarding agency must use OMB-approved common information collections, as applicable, when
providing financial and performance reporting information.

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§ 200.329 Monitoring and reporting program performance.
(a) Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations
of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal
awards to assure compliance with applicable Federal requirements and performance expectations are
being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See
also § 200.332.
(b) Reporting program performance. The Federal awarding agency must use OMB-approved common
information collections, as applicable, when providing financial and performance reporting information.
As appropriate and in accordance with above mentioned information collections, the Federal awarding
agency must require the recipient to relate financial data and accomplishments to performance goals and
objectives of the Federal award. Also, in accordance with above mentioned common information
collections, and when required by the terms and conditions of the Federal award, recipients must provide
cost information to demonstrate cost effective practices (e.g., through unit cost data). In some instances
(e.g., discretionary research awards), this will be limited to the requirement to submit technical
performance reports (to be evaluated in accordance with Federal awarding agency policy). Reporting
requirements must be clearly articulated such that, where appropriate, performance during the execution
of the Federal award has a standard against which non-Federal entity performance can be measured.
(c) Non-construction performance reports. The Federal awarding agency must use standard, governmentwide
OMB-approved data elements for collection of performance information including performance progress
reports, Research Performance Progress Reports.
(1) The non-Federal entity must submit performance reports at the interval required by the Federal
awarding agency or pass-through entity to best inform improvements in program outcomes and
productivity. Intervals must be no less frequent than annually nor more frequent than quarterly
except in unusual circumstances, for example where more frequent reporting is necessary for the
effective monitoring of the Federal award or could significantly affect program outcomes. Reports
submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90
calendar days after the reporting period. Reports submitted quarterly or semiannually must be due
no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency
or pass-through entity may require annual reports before the anniversary dates of multiple year
Federal awards. The final performance report submitted by the non-Federal entity and/or passthrough entity must be due no later than 120 calendar days after the period of performance end
date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the
period of performance end date, all final performance reports as required by the terms and
conditions of the Federal award. See also § 200.344. If a justified request is submitted by a nonFederal entity, the Federal agency may extend the due date for any performance report.
(2) As appropriate in accordance with above mentioned performance reporting, these reports will
contain, for each Federal award, brief information on the following unless other data elements are
approved by OMB in the agency information collection request:
(i)

A comparison of actual accomplishments to the objectives of the Federal award established for
the period. Where the accomplishments of the Federal award can be quantified, a computation
of the cost (for example, related to units of accomplishment) may be required if that
information will be useful. Where performance trend data and analysis would be informative to
the Federal awarding agency program, the Federal awarding agency should include this as a
performance reporting requirement.

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(ii) The reasons why established goals were not met, if appropriate.
(iii) Additional pertinent information including, when appropriate, analysis and explanation of cost
overruns or high unit costs.
(d) Construction performance reports. For the most part, onsite technical inspections and certified
percentage of completion data are relied on heavily by Federal awarding agencies and pass-through
entities to monitor progress under Federal awards and subawards for construction. The Federal awarding
agency may require additional performance reports only when considered necessary.
(e) Significant developments. Events may occur between the scheduled performance reporting dates that
have significant impact upon the supported activity. In such cases, the non-Federal entity must inform the
Federal awarding agency or pass-through entity 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 objective
of the Federal award. This disclosure must include a statement of the action taken, or contemplated,
and any assistance needed to resolve the situation.
(2) Favorable developments which enable meeting time schedules and objectives sooner or at less cost
than anticipated or producing more or different beneficial results than originally planned.
(f) Site visits. The Federal awarding agency may make site visits as warranted by program needs.
(g) Performance report requirement waiver. The Federal awarding agency may waive any performance report
required by this part if not needed.

§ 200.330 Reporting on real property.
The Federal awarding agency or pass-through entity must require a non-Federal entity to submit reports at least
annually on the status of real property in which the Federal Government retains an interest, unless the Federal
interest in the real property extends 15 years or longer. In those instances where the Federal interest attached is for
a period of 15 years or more, the Federal awarding agency or pass-through entity, at its option, may require the nonFederal entity to report at various multi-year frequencies (e.g., every two years or every three years, not to exceed a
five-year reporting period; or a Federal awarding agency or pass-through entity may require annual reporting for the
first three years of a Federal award and thereafter require reporting every five years).

SUBRECIPIENT MONITORING AND MANAGEMENT
§ 200.331 Subrecipient and contractor determinations.
The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor,
depending on the substance of its agreements with Federal awarding agencies and pass-through entities.
Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the
disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a
contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to
support these determinations provided such guidance does not conflict with this section.
(a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a
Federal assistance relationship with the subrecipient. See definition for Subaward in § 200.1 of this part.
Characteristics which support the classification of the non-Federal entity as a subrecipient include when
the non-Federal entity:
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(1) Determines who is eligible to receive what Federal assistance;
(2) Has its performance measured in relation to whether objectives of a Federal program were met;
(3) Has responsibility for programmatic decision-making;
(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal
award; and
(5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose
specified in authorizing statute, as opposed to providing goods or services for the benefit of the
pass-through entity.
(b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own
use and creates a procurement relationship with the contractor. See the definition of contract in § 200.1 of
this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a
contractor are when the contractor:
(1) Provides the goods and services within normal business operations;
(2) Provides similar goods or services to many different purchasers;
(3) Normally operates in a competitive environment;
(4) Provides goods or services that are ancillary to the operation of the Federal program; and
(5) Is not subject to compliance requirements of the Federal program as a result of the agreement,
though similar requirements may apply for other reasons.
(c) Use of judgment in making determination. In determining whether an agreement between a pass-through
entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of
the relationship is more important than the form of the agreement. All of the characteristics listed above
may not be present in all cases, and the pass-through entity must use judgment in classifying each
agreement as a subaward or a procurement contract.

§ 200.332 Requirements for pass-through entities.
All pass-through entities must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the
following information at the time of the subaward and if any of these data elements change, include the
changes in subsequent subaward modification. When some of this information is not available, the passthrough entity must provide the best information available to describe the Federal award and subaward.
Required information includes:
(1) Federal award identification.
(i)

Subrecipient name (which must match the name associated with its unique entity identifier);

(ii) Subrecipient's unique entity identifier;
(iii) Federal Award Identification Number (FAIN);
(iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to
the recipient by the Federal agency;
(v) Subaward Period of Performance Start and End Date;
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(vi) Subaward Budget Period Start and End Date;
(vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
(viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity
including the current financial obligation;
(ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
(x) Federal award project description, as required to be responsive to the Federal Funding
Accountability and Transparency Act (FFATA);
(xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding
official of the Pass-through entity;
(xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount
made available under each Federal award and the Assistance Listings Number at time of
disbursement;
(xiii) Identification of whether the award is R&D; and
(xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per §
200.414.
(2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is
used in accordance with Federal statutes, regulations and the terms and conditions of the Federal
award;
(3) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the
pass-through entity to meet its own responsibility to the Federal awarding agency including
identification of any required financial and performance reports;
(4)
(i)

An approved federally recognized indirect cost rate negotiated between the subrecipient and
the Federal Government. If no approved rate exists, the pass-through entity must determine the
appropriate rate in collaboration with the subrecipient, which is either:
(A) The negotiated indirect cost rate between the pass-through entity and the subrecipient;
which can be based on a prior negotiated rate between a different PTE and the same
subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is
not required to collect information justifying this rate, but may elect to do so;
(B) The de minimis indirect cost rate.

(ii) The pass-through entity must not require use of a de minimis indirect cost rate if the
subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation
method to account for indirect costs in accordance with § 200.405(d).
(5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the
subrecipient's records and financial statements as necessary for the pass-through entity to meet the
requirements of this part; and
(6) Appropriate terms and conditions concerning closeout of the subaward.

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(b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and
conditions of the subaward for purposes of determining the appropriate subrecipient monitoring
described in paragraphs (d) and (e) of this section, which may include consideration of such factors as:
(1) The subrecipient's prior experience with the same or similar subawards;
(2) The results of previous audits including whether or not the subrecipient receives a Single Audit in
accordance with Subpart F of this part, and the extent to which the same or similar subaward has
been audited as a major program;
(3) Whether the subrecipient has new personnel or new or substantially changed systems; and
(4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives
Federal awards directly from a Federal awarding agency).
(c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in §
200.208.
(d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized
purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward;
and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient
must include:
(1) Reviewing financial and performance reports required by the pass-through entity.
(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all
deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through
entity detected through audits, on-site reviews, and written confirmation from the subrecipient,
highlighting the status of actions planned or taken to address Single Audit findings related to the
particular subaward.
(3) Issuing a management decision for applicable audit findings pertaining only to the Federal award
provided to the subrecipient from the pass-through entity as required by § 200.521.
(4) The pass-through entity is responsible for resolving audit findings specifically related to the
subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current
Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded
from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may
rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit
follow-up and make management decisions related to cross-cutting findings in accordance with
section § 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through
entity to issue subawards that conform to agency and award-specific requirements, to manage risk
through ongoing subaward monitoring, and to monitor the status of the findings that are specifically
related to the subaward.
(e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in
paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to
ensure proper accountability and compliance with program requirements and achievement of
performance goals:
(1) Providing subrecipients with training and technical assistance on program-related matters; and
(2) Performing on-site reviews of the subrecipient's program operations;
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(3) Arranging for agreed-upon-procedures engagements as described in § 200.425.
(f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the
subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the
threshold set forth in § 200.501.
(g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate
conditions that necessitate adjustments to the pass-through entity's own records.
(h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this
part and in program regulations.
[85 FR 49543, Aug. 13, 2020, as amended at 86 FR 10440, Feb. 22, 2021]

§ 200.333 Fixed amount subawards.
With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based
on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for
fixed amount awards in § 200.201.

RECORD RETENTION AND ACCESS
§ 200.334 Retention requirements for records.
Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a
Federal award must be retained for a period of three years from the date of submission of the final expenditure
report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly
or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the
case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record
retention requirements upon non-Federal entities. The only exceptions are the following:
(a) If any litigation, claim, or audit is started before the expiration of the 3-year period, the records must be
retained until all litigation, claims, or audit findings involving the records have been resolved and final
action taken.
(b) When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for
audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the
retention period.
(c) Records for real property and equipment acquired with Federal funds must be retained for 3 years after
final disposition.
(d) When records are transferred to or maintained by the Federal awarding agency or pass-through entity, the
3-year retention requirement is not applicable to the non-Federal entity.
(e) Records for program income transactions after the period of performance. In some cases recipients must
report program income after the period of performance. Where there is such a requirement, the retention
period for the records pertaining to the earning of the program income starts from the end of the nonFederal entity's fiscal year in which the program income is earned.

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(f) Indirect cost rate proposals and cost allocations plans. 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).
(1) If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to
the Federal Government (or to the pass-through entity) to form the basis for negotiation of the rate,
then the 3-year retention period for its supporting records starts from the date of such submission.
(2) 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 pass-through entity) for negotiation purposes, then
the 3-year retention period for the proposal, plan, or computation and its supporting records starts
from the end of the fiscal year (or other accounting period) covered by the proposal, plan, or other
computation.

§ 200.335 Requests for transfer of records.
The Federal awarding agency must request transfer of certain records to its custody from the non-Federal entity
when it determines that the records possess long-term retention value. However, in order to avoid duplicate
recordkeeping, the Federal awarding agency may make arrangements for the non-Federal entity to retain any
records that are continuously needed for joint use.

§ 200.336 Methods for collection, transmission, and storage of information.
The Federal awarding agency and the non-Federal entity should, whenever practicable, collect, transmit, and store
Federal award-related information in open and machine-readable formats rather than in closed formats or on paper
in accordance with applicable legislative requirements. A machine-readable format is a format in a standard
computer language (not English text) that can be read automatically by a web browser or computer system. The
Federal awarding agency or pass-through entity must always provide or accept paper versions of Federal awardrelated information to and from the non-Federal entity upon request. If paper copies are submitted, the Federal
awarding agency or pass-through entity must not require more than an original and two copies. When original
records are electronic and cannot be altered, there is no need to create and retain paper copies. When original
records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic
media provided that they are subject to periodic quality control reviews, provide reasonable safeguards against
alteration, and remain readable.

§ 200.337 Access to records.
(a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General
of the United States, and the pass-through entity, or any of their authorized representatives, must have the
right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to
the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also
includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview
and discussion related to such documents.
(b) Extraordinary and rare circumstances. Only under extraordinary and rare circumstances would such
access include review of the true name of victims of a crime. Routine monitoring cannot be considered
extraordinary and rare circumstances that would necessitate access to this information. When access to
the true name of victims of a crime is necessary, appropriate steps to protect this sensitive information

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must be taken by both the non-Federal entity and the Federal awarding agency. Any such access, other
than under a court order or subpoena pursuant to a bona fide confidential investigation, must be approved
by the head of the Federal awarding agency or delegate.
(c) Expiration of right of access. The rights of access in this section are not limited to the required retention
period but last as long as the records are retained. Federal awarding agencies and pass-through entities
must not impose any other access requirements upon non-Federal entities.

§ 200.338 Restrictions on public access to records.
No Federal awarding agency may place restrictions on the non-Federal entity that limit public access to the records
of the non-Federal entity pertinent to a Federal award, except for protected personally identifiable information (PII)
or when the Federal awarding agency can demonstrate that such records will be kept confidential and would have
been exempted from disclosure pursuant to the Freedom of Information Act (5 U.S.C. 552) or controlled
unclassified information pursuant to Executive Order 13556 if the records had belonged to the Federal awarding
agency. The Freedom of Information Act (5 U.S.C. 552) (FOIA) does not apply to those records that remain under a
non-Federal entity's control except as required under § 200.315. Unless required by Federal, state, local, and tribal
statute, non-Federal entities are not required to permit public access to their records. The non-Federal entity's
records provided to a Federal agency generally will be subject to FOIA and applicable exemptions.

REMEDIES FOR NONCOMPLIANCE
§ 200.339 Remedies for noncompliance.
If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and
conditions of a Federal award, the Federal awarding agency or pass-through entity may impose additional
conditions, as described in § 200.208. If the Federal awarding agency or pass-through entity determines that
noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or passthrough entity may take one or more of the following actions, as appropriate in the circumstances:
(a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or
more severe enforcement action by the Federal awarding agency or pass-through entity.
(b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of
the activity or action not in compliance.
(c) Wholly or partly suspend or terminate the Federal award.
(d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding
agency regulations (or in the case of a pass-through entity, recommend such a proceeding be initiated by
a Federal awarding agency).
(e) Withhold further Federal awards for the project or program.
(f) Take other remedies that may be legally available.

§ 200.340 Termination.
(a) The Federal award may be terminated in whole or in part as follows:
(1) By the Federal awarding agency or pass-through entity, if a non-Federal entity fails to comply with the
terms and conditions of a Federal award;
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(2) By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an
award no longer effectuates the program goals or agency priorities;
(3) By the Federal awarding agency or pass-through entity with the consent of the non-Federal entity, in
which case the two parties must agree upon the termination conditions, including the effective date
and, in the case of partial termination, the portion to be terminated;
(4) By the non-Federal entity upon sending to the Federal awarding agency or pass-through entity written
notification setting forth the reasons for such termination, the effective date, and, in the case of
partial termination, the portion to be terminated. However, if the Federal awarding agency or passthrough entity determines in the case of partial termination that the reduced or modified portion of
the Federal award or subaward will not accomplish the purposes for which the Federal award was
made, the Federal awarding agency or pass-through entity may terminate the Federal award in its
entirety; or
(5) By the Federal awarding agency or pass-through entity pursuant to termination provisions included in
the Federal award.
(b) A Federal awarding agency should clearly and unambiguously specify termination provisions applicable to
each Federal award, in applicable regulations or in the award, consistent with this section.
(c) When a Federal awarding agency terminates a Federal award prior to the end of the period of performance
due to the non-Federal entity's material failure to comply with the Federal award terms and conditions, the
Federal awarding agency must report the termination to the OMB-designated integrity and performance
system accessible through SAM (currently FAPIIS).
(1) The information required under paragraph (c) of this section is not to be reported to designated
integrity and performance system until the non-Federal entity either—
(i)

Has exhausted its opportunities to object or challenge the decision, see § 200.342; or

(ii) Has not, within 30 calendar days after being notified of the termination, informed the Federal
awarding agency that it intends to appeal the Federal awarding agency's decision to terminate.
(2) If a Federal awarding agency, after entering information into the designated integrity and
performance system about a termination, subsequently:
(i)

Learns that any of that information is erroneous, the Federal awarding agency must correct the
information in the system within three business days;

(ii) Obtains an update to that information that could be helpful to other Federal awarding agencies,
the Federal awarding agency is strongly encouraged to amend the information in the system to
incorporate the update in a timely way.
(3) Federal awarding agencies, must not post any information that will be made publicly available in the
non-public segment of designated integrity and performance system that is covered by a disclosure
exemption under the Freedom of Information Act. If the non-Federal entity asserts within seven
calendar days to the Federal awarding agency who posted the information, that some of the
information made publicly available is covered by a disclosure exemption under the Freedom of
Information Act, the Federal awarding agency who posted the information must remove the posting
within seven calendar days of receiving the assertion. Prior to reposting the releasable information,
the Federal agency must resolve the issue in accordance with the agency's Freedom of Information
Act procedures.
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(d) When a Federal award is terminated or partially terminated, both the Federal awarding agency or passthrough entity and the non-Federal entity remain responsible for compliance with the requirements in §§
200.344 and 200.345.

§ 200.341 Notification of termination requirement.
(a) The Federal agency or pass-through entity must provide to the non-Federal entity a notice of termination.
(b) If the Federal award is terminated for the non-Federal entity's material failure to comply with the U.S.
Constitution, Federal statutes, regulations, or terms and conditions of the Federal award, the notification
must state that—
(1) The termination decision will be reported to the OMB-designated integrity and performance system
accessible through SAM (currently FAPIIS);
(2) The information will be available in the OMB-designated integrity and performance system for a
period of five years from the date of the termination, then archived;
(3) Federal awarding agencies that consider making a Federal award to the non-Federal entity during
that five year period must consider that information in judging whether the non-Federal entity is
qualified to receive the Federal award, when the Federal share of the Federal award is expected to
exceed the simplified acquisition threshold over the period of performance;
(4) The non-Federal entity may comment on any information the OMB-designated integrity and
performance system contains about the non-Federal entity for future consideration by Federal
awarding agencies. The non-Federal entity may submit comments to the awardee integrity and
performance portal accessible through SAM (currently (CPARS).
(5) Federal awarding agencies will consider non-Federal entity comments when determining whether the
non-Federal entity is qualified for a future Federal award.
(c) Upon termination of a Federal award, the Federal awarding agency must provide the information required
under FFATA to the Federal website established to fulfill the requirements of FFATA, and update or notify
any other relevant governmentwide systems or entities of any indications of poor performance as
required by 41 U.S.C. 417b and 31 U.S.C. 3321 and implementing guidance at 2 CFR part 77 (forthcoming
at time of publication). See also the requirements for Suspension and Debarment at 2 CFR part 180.

§ 200.342 Opportunities to object, hearings, and appeals.
Upon taking any remedy for non-compliance, the Federal awarding agency must provide the non-Federal entity an
opportunity to object and provide information and documentation challenging the suspension or termination action,
in accordance with written processes and procedures published by the Federal awarding agency. The Federal
awarding agency or pass-through entity must comply with any requirements for hearings, appeals or other
administrative proceedings to which the non-Federal entity is entitled under any statute or regulation applicable to
the action involved.

§ 200.343 Effects of suspension and termination.
Costs to the non-Federal entity resulting from financial obligations incurred by the non-Federal entity during a
suspension or after termination of a Federal award or subaward are not allowable unless the Federal awarding
agency or pass-through entity expressly authorizes them in the notice of suspension or termination or subsequently.
However, costs during suspension or after termination are allowable if:

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(a) The costs result from financial obligations which were properly incurred by the non-Federal entity before
the effective date of suspension or termination, are not in anticipation of it; and
(b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of
the period of performance in which the termination takes effect.

CLOSEOUT
§ 200.344 Closeout.
The Federal awarding agency or pass-through entity will close out the Federal award when it determines that all
applicable administrative actions and all required work of the Federal award have been completed by the nonFederal entity. If the non-Federal entity fails to complete the requirements, the Federal awarding agency or passthrough entity will proceed to close out the Federal award with the information available. This section specifies the
actions the non-Federal entity and Federal awarding agency or pass-through entity must take to complete this
process at the end of the period of performance.
(a) The recipient must submit, no later than 120 calendar days after the end date of the period of
performance, all financial, performance, and other reports as required by the terms and conditions of the
Federal award. A subrecipient must submit to the pass-through entity, no later than 90 calendar days (or
an earlier date as agreed upon by the pass-through entity and subrecipient) after the end date of the
period of performance, all financial, performance, and other reports as required by the terms and
conditions of the Federal award. The Federal awarding agency or pass-through entity may approve
extensions when requested and justified by the non-Federal entity, as applicable.
(b) Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity
must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days
after the end date of the period of performance as specified in the terms and conditions of the Federal
award.
(c) The Federal awarding agency or pass-through entity must make prompt payments to the non-Federal
entity for costs meeting the requirements in Subpart E of this part under the Federal award being closed
out.
(d) The non-Federal entity must promptly refund any balances of unobligated cash that the Federal awarding
agency or pass-through entity paid in advance or paid and that are not authorized to be retained by the
non-Federal entity for use in other projects. See OMB Circular A–129 and see § 200.346, for requirements
regarding unreturned amounts that become delinquent debts.
(e) Consistent with the terms and conditions of the Federal award, the Federal awarding agency or passthrough entity must make a settlement for any upward or downward adjustments to the Federal share of
costs after closeout reports are received.
(f) The non-Federal entity must account for any real and personal property acquired with Federal funds or
received from the Federal Government in accordance with §§ 200.310 through 200.316 and 200.330.
(g) When a recipient or subrecipient completes all closeout requirements, the Federal awarding agency or
pass-through entity must promptly complete all closeout actions for Federal awards. The Federal
awarding agency must make every effort to complete closeout actions no later than one year after the
end of the period of performance unless otherwise directed by authorizing statutes. Closeout actions
include Federal awarding agency actions in the grants management and payment systems.
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(h) If the non-Federal entity does not submit all reports in accordance with this section and the terms and
conditions of the Federal Award, the Federal awarding agency must proceed to close out with the
information available within one year of the period of performance end date.
(i)

If the non-Federal entity does not submit all reports in accordance with this section within one year of the
period of performance end date, the Federal awarding agency must report the non-Federal entity's
material failure to comply with the terms and conditions of the award with the OMB-designated integrity
and performance system (currently FAPIIS). Federal awarding agencies may also pursue other
enforcement actions per § 200.339.

POST-CLOSEOUT ADJUSTMENTS AND CONTINUING RESPONSIBILITIES
§ 200.345 Post-closeout adjustments and continuing responsibilities.
(a) The closeout of a Federal award does not affect any of the following:
(1) The right of the Federal awarding agency or pass-through entity to disallow costs and recover funds
on the basis of a later audit or other review. The Federal awarding agency or pass-through entity
must make any cost disallowance determination and notify the non-Federal entity within the record
retention period.
(2) The requirement for the non-Federal entity to return any funds due as a result of later refunds,
corrections, or other transactions including final indirect cost rate adjustments.
(3) The ability of the Federal awarding agency to make financial adjustments to a previously closed
award such as resolving indirect cost payments and making final payments.
(4) Audit requirements in subpart F of this part.
(5) Property management and disposition requirements in §§ 200.310 through 200.316 of this subpart.
(6) Records retention as required in §§ 200.334 through 200.337 of this subpart.
(b) After closeout of the Federal award, a relationship created under the Federal award may be modified or
ended in whole or in part with the consent of the Federal awarding agency or pass-through entity and the
non-Federal entity, provided the responsibilities of the non-Federal entity referred to in paragraph (a) of
this section, including those for property management as applicable, are considered and provisions made
for continuing responsibilities of the non-Federal entity, as appropriate.

COLLECTION OF AMOUNTS DUE
§ 200.346 Collection of amounts due.
(a) Any funds paid to the non-Federal entity in excess of the amount to which the non-Federal entity is finally
determined to be entitled under the terms of the Federal award constitute a debt to the Federal
Government. If not paid within 90 calendar days after demand, the Federal awarding agency may reduce
the debt by:
(1) Making an administrative offset against other requests for reimbursements;
(2) Withholding advance payments otherwise due to the non-Federal entity; or
(3) Other action permitted by Federal statute.
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(b) Except where otherwise provided by statutes or regulations, the Federal awarding agency will charge
interest on an overdue debt in accordance with the Federal Claims Collection Standards (31 CFR parts
900 through 999). The date from which interest is computed is not extended by litigation or the filing of
any form of appeal.

Subpart E—Cost Principles
GENERAL PROVISIONS
§ 200.400 Policy guide.
The application of these cost principles is based on the fundamental premises that:
(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award
through the application of sound management practices.
(b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with
underlying agreements, program objectives, and the terms and conditions of the Federal award.
(c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has
the primary responsibility for employing whatever form of sound organization and management
techniques may be necessary in order to assure proper and efficient administration of the Federal award.
(d) The application of these cost principles should require no significant changes in the internal accounting
policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal
entity must be consistent with these cost principles and support the accumulation of costs as required by
the principles, and must provide for adequate documentation to support costs charged to the Federal
award.
(e) In reviewing, negotiating and approving cost allocation plans or indirect cost proposals, the cognizant
agency for indirect costs should generally assure that the non-Federal entity is applying these cost
accounting principles on a consistent basis during their review and negotiation of indirect cost proposals.
Where wide variations exist in the treatment of a given cost item by the non-Federal entity, the
reasonableness and equity of such treatments should be fully considered. See the definition of indirect
(facilities & administrative (F&A)) costs in § 200.1 of this part.
(f) For non-Federal entities that educate and engage students in research, the dual role of students as both
trainees and employees (including pre- and post-doctoral staff) contributing to the completion of Federal
awards for research must be recognized in the application of these principles.
(g) The non-Federal entity may not earn or keep any profit resulting from Federal financial assistance, unless
explicitly authorized by the terms and conditions of the Federal award. See also § 200.307.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13, 2020]

§ 200.401 Application.
(a) General. These principles must be used in determining the allowable costs of work performed by the nonFederal entity under Federal awards. These principles also must be used by the non-Federal entity as a
guide in the pricing of fixed-price contracts and subcontracts where costs are used in determining the
appropriate price. The principles do not apply to:
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(1) Arrangements under which Federal financing is in the form of loans, scholarships, fellowships,
traineeships, or other fixed amounts based on such items as education allowance or published
tuition rates and fees.
(2) For IHEs, capitation awards, which are awards based on case counts or number of beneficiaries
according to the terms and conditions of the Federal award.
(3) Fixed amount awards. See also § 200.1 Definitions and 200.201.
(4) Federal awards to hospitals (see appendix IX to this part).
(5) Other awards under which the non-Federal entity is not required to account to the Federal
Government for actual costs incurred.
(b) Federal contract. Where a Federal contract awarded to a non-Federal entity is subject to the Cost
Accounting Standards (CAS), it incorporates the applicable CAS clauses, Standards, and CAS
administration requirements per the 48 CFR Chapter 99 and 48 CFR part 30 (FAR Part 30). CAS applies
directly to the CAS-covered contract and the Cost Accounting Standards at 48 CFR parts 9904 or 9905
takes precedence over the cost principles in this subpart E with respect to the allocation of costs. When a
contract with a non-Federal entity is subject to full CAS coverage, the allowability of certain costs under
the cost principles will be affected by the allocation provisions of the Cost Accounting Standards (e.g.,
CAS 414—48 CFR 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, and CAS
417—48 CFR 9904.417, Cost of Money as an Element of the Cost of Capital Assets Under Construction),
apply rather the allowability provisions of § 200.449. In complying with those requirements, the nonFederal entity's application of cost accounting practices for estimating, accumulating, and reporting costs
for other Federal awards and other cost objectives under the CAS-covered contract still must be
consistent with its cost accounting practices for the CAS-covered contracts. In all cases, only one set of
accounting records needs to be maintained for the allocation of costs by the non-Federal entity.
(c) Exemptions. Some nonprofit organizations, because of their size and nature of operations, can be
considered to be similar to for-profit entities for purpose of applicability of cost principles. Such nonprofit
organizations must operate under Federal cost principles applicable to for-profit entities located at 48
CFR 31.2. A listing of these organizations is contained in appendix VIII to this part. Other organizations, as
approved by the cognizant agency for indirect costs, may be added from time to time.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020]

BASIC CONSIDERATIONS
§ 200.402 Composition of costs.
Total cost. The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less
any applicable credits.

§ 200.403 Factors affecting allowability of costs.
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be
allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under
these principles.
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(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other
activities of the non-Federal entity.
(d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any
other cost incurred for the same purpose in like circumstances has been allocated to the Federal award
as an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and
local governments and Indian tribes only, as otherwise provided for in this part.
(f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. See also § 200.306(b).
(g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.
(h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at
its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent
budget periods pursuant to § 200.308(e)(3).
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562, Aug. 13, 2020]

§ 200.404 Reasonable costs.
A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent
person under the circumstances prevailing at the time the decision was made to incur the cost. The question of
reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In
determining reasonableness of a given cost, consideration must be given to:
(a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the nonFederal entity or the proper and efficient performance of the Federal award.
(b) The restraints or requirements imposed by such factors as: sound business practices; arm's-length
bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the
Federal award.
(c) Market prices for comparable goods or services for the geographic area.
(d) Whether the individuals concerned acted with prudence in the circumstances considering their
responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the
public at large, and the Federal Government.
(e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding
the incurrence of costs, which may unjustifiably increase the Federal award's cost.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014]

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§ 200.405 Allocable costs.
(a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved
are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits
received. This standard is met if the cost:
(1) Is incurred specifically for the Federal award;
(2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in
proportions that may be approximated using reasonable methods; and
(3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal
award in accordance with the principles in this subpart.
(b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable
activities and donated services by the non-Federal entity or third parties, will receive an appropriate
allocation of indirect costs.
(c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be
charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal
statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this
prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or
more Federal awards in accordance with existing Federal statutes, regulations, or the terms and
conditions of the Federal awards.
(d) Direct cost allocation principles: If a cost benefits two or more projects or activities in proportions that
can be determined without undue effort or cost, the cost must be allocated to the projects based on the
proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be
determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of
this section, the costs may be allocated or transferred to benefitted projects on any reasonable
documented basis. Where the purchase of equipment or other capital asset is specifically authorized
under a Federal award, the costs are assignable to the Federal award regardless of the use that may be
made of the equipment or other capital asset involved when no longer needed for the purpose for which it
was originally required. See also §§ 200.310 through 200.316 and 200.439.
(e) If the contract is subject to CAS, costs must be allocated to the contract pursuant to the Cost Accounting
Standards. To the extent that CAS is applicable, the allocation of costs in accordance with CAS takes
precedence over the allocation provisions in this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.406 Applicable credits.
(a) Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or
reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such
transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses,
insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that
such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be
credited to the Federal award either as a cost reduction or cash refund, as appropriate.

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(b) In some instances, the amounts received from the Federal Government to finance activities or service
operations of the non-Federal entity should be treated as applicable credits. Specifically, the concept of
netting such credit items (including any amounts used to meet cost sharing or matching requirements)
must be recognized in determining the rates or amounts to be charged to the Federal award. (See §§
200.436 and 200.468, for areas of potential application in the matter of Federal financing of activities.)
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.407 Prior written approval (prior approval).
Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to
determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the
non-Federal entity may seek the prior written approval of the cognizant agency for indirect costs or the Federal
awarding agency in advance of the incurrence of special or unusual costs. Prior written approval should include the
timeframe or scope of the agreement. The absence of prior written approval on any element of cost will not, in itself,
affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability
as described under certain circumstances in the following sections of this part:
(a) § 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and
contracts, paragraph (b)(5);
(b) § 200.306 Cost sharing or matching;
(c) § 200.307 Program income;
(d) § 200.308 Revision of budget and program plans;
(e) § 200.311 Real property;
(f) § 200.313 Equipment;
(g) § 200.333 Fixed amount subawards;
(h) § 200.413 Direct costs, paragraph (c);
(i)

§ 200.430 Compensation—personal services, paragraph (h);

(j)

§ 200.431 Compensation—fringe benefits;

(k) § 200.438 Entertainment costs;
(l)

§ 200.439 Equipment and other capital expenditures;

(m) § 200.440 Exchange rates;
(n) § 200.441 Fines, penalties, damages and other settlements;
(o) § 200.442 Fund raising and investment management costs;
(p) § 200.445 Goods or services for personal use;
(q) § 200.447 Insurance and indemnification;
(r) § 200.454 Memberships, subscriptions, and professional activity costs, paragraph (c);
(s) § 200.455 Organization costs;
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(t) § 200.456 Participant support costs;
(u) § 200.458 Pre-award costs;
(v) § 200.462 Rearrangement and reconversion costs;
(w) § 200.467 Selling and marketing costs;
(x) § 200.470 Taxes (including Value Added Tax); and
(y) § 200.475 Travel costs.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

§ 200.408 Limitation on allowance of costs.
The Federal award may be subject to statutory requirements that limit the allowability of costs. When the maximum
amount allowable under a limitation is less than the total amount determined in accordance with the principles in
this part, the amount not recoverable under the Federal award may not be charged to the Federal award.

§ 200.409 Special considerations.
In addition to the basic considerations regarding the allowability of costs highlighted in this subtitle, other subtitles
in this part describe special considerations and requirements applicable to states, local governments, Indian tribes,
and IHEs. In addition, certain provisions among the items of cost in this subpart are only applicable to certain types
of non-Federal entities, as specified in the following sections:
(a) Direct and Indirect (F&A) Costs (§§ 200.412–200.415) of this subpart;
(b) Special Considerations for States, Local Governments and Indian Tribes (§§ 200.416 and 200.417) of this
subpart; and
(c) Special Considerations for Institutions of Higher Education (§§ 200.418 and 200.419) of this subpart.
[85 FR 49562, Aug. 13, 2020]

§ 200.410 Collection of unallowable costs.
Payments made for costs determined to be unallowable by either the Federal awarding agency, cognizant agency
for indirect costs, or pass-through entity, either as direct or indirect costs, must be refunded (including interest) to
the Federal Government in accordance with instructions from the Federal agency that determined the costs are
unallowable unless Federal statute or regulation directs otherwise. See also §§ 200.300 through 200.309 in subpart
D of this part.
[85 FR 49562, Aug. 13, 2020]

§ 200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable
costs.
(a) Negotiated indirect (F&A) cost rates based on a proposal later found to have included costs that:

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(1) Are unallowable as specified by Federal statutes, regulations or the terms and conditions of a
Federal award; or
(2) Are unallowable because they are not allocable to the Federal award(s), must be adjusted, or a
refund must be made, in accordance with the requirements of this section. These adjustments or
refunds are designed to correct the proposals used to establish the rates and do not constitute a
reopening of the rate negotiation. The adjustments or refunds will be made regardless of the type of
rate negotiated (predetermined, final, fixed, or provisional).
(b) For rates covering a future fiscal year of the non-Federal entity, the unallowable costs will be removed
from the indirect (F&A) cost pools and the rates appropriately adjusted.
(c) For rates covering a past period, the Federal share of the unallowable costs will be computed for each
year involved and a cash refund (including interest chargeable in accordance with applicable regulations)
will be made to the Federal Government. If cash refunds are made for past periods covered by provisional
or fixed rates, appropriate adjustments will be made when the rates are finalized to avoid duplicate
recovery of the unallowable costs by the Federal Government.
(d) For rates covering the current period, either a rate adjustment or a refund, as described in paragraphs (b)
and (c) of this section, must be required by the cognizant agency for indirect costs. The choice of method
must be at the discretion of the cognizant agency for indirect costs, based on its judgment as to which
method would be most practical.
(e) The amount or proportion of unallowable costs included in each year's rate will be assumed to be the
same as the amount or proportion of unallowable costs included in the base year proposal used to
establish the rate.

DIRECT AND INDIRECT (F&A) COSTS
§ 200.412 Classification of costs.
There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting
system. A cost may be direct with respect to some specific service or function, but indirect with respect to the
Federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same
purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost in order to avoid
possible double-charging of Federal awards. Guidelines for determining direct and indirect (F&A) costs charged to
Federal awards are provided in this subpart.

§ 200.413 Direct costs.
(a) General. Direct costs are those costs that can be identified specifically with a particular final cost
objective, such as a Federal award, or other internally or externally funded activity, or that can be directly
assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same
purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs. See
also § 200.405.
(b) Application to Federal awards. Identification with the Federal award rather than the nature of the goods
and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of
Federal awards. Typical costs charged directly to a Federal award are the compensation of employees
who work on that award, their related fringe benefit costs, the costs of materials and other items of
expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise
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would be treated as indirect costs may also be considered direct costs. Examples include extraordinary
utility consumption, the cost of materials supplied from stock or services rendered by specialized
facilities, program evaluation costs, or other institutional service operations.
(c) The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct
charging of these costs may be appropriate only if all of the following conditions are met:
(1) Administrative or clerical services are integral to a project or activity;
(2) Individuals involved can be specifically identified with the project or activity;
(3) Such costs are explicitly included in the budget or have the prior written approval of the Federal
awarding agency; and
(4) The costs are not also recovered as indirect costs.
(d) Minor items. Any direct cost of minor amount may be treated as an indirect (F&A) cost for reasons of
practicality where such accounting treatment for that item of cost is consistently applied to all Federal
and non-Federal cost objectives.
(e) The costs of certain activities are not allowable as charges to Federal awards. However, even though
these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless
must be treated as direct costs for purposes of determining indirect (F&A) cost rates and be allocated
their equitable share of the non-Federal entity's indirect costs if they represent activities which:
(1) Include the salaries of personnel,
(2) Occupy space, and
(3) Benefit from the non-Federal entity's indirect (F&A) costs.
(f) For nonprofit organizations, the costs of activities performed by the non-Federal entity primarily as a
service to members, clients, or the general public when significant and necessary to the non-Federal
entity's mission must be treated as direct costs whether or not allowable, and be allocated an equitable
share of indirect (F&A) costs. Some examples of these types of activities include:
(1) Maintenance of membership rolls, subscriptions, publications, and related functions. See also §
200.454.
(2) Providing services and information to members, legislative or administrative bodies, or the public.
See also §§ 200.454 and 200.450.
(3) Promotion, lobbying, and other forms of public relations. See also §§ 200.421 and 200.450.
(4) Conferences except those held to conduct the general administration of the non-Federal entity. See
also § 200.432.
(5) Maintenance, protection, and investment of special funds not used in operation of the non-Federal
entity. See also § 200.442.
(6) Administration of group benefits on behalf of members or clients, including life and hospital
insurance, annuity or retirement plans, and financial aid. See also § 200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, 2020]

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§ 200.414 Indirect (F&A) costs.
(a) Facilities and administration classification. For major Institutions of Higher Education (IHE) and major
nonprofit organizations, indirect (F&A) costs must be classified within two broad categories: “Facilities”
and “Administration.” “Facilities” is defined as depreciation on buildings, equipment and capital
improvement, interest on debt associated with certain buildings, equipment and capital improvements,
and operations and maintenance expenses. “Administration” is defined as general administration and
general expenses such as the director's office, accounting, personnel and all other types of expenditures
not listed specifically under one of the subcategories of “Facilities” (including cross allocations from other
pools, where applicable). For nonprofit organizations, library expenses are included in the “Administration”
category; for IHEs, they are included in the “Facilities” category. Major IHEs are defined as those required
to use the Standard Format for Submission as noted in appendix III to this part, and Rate Determination
for Institutions of Higher Education paragraph C. 11. Major nonprofit organizations are those which
receive more than $10 million dollars in direct Federal funding.
(b) Diversity of nonprofit organizations. Because of the diverse characteristics and accounting practices of
nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect
(F&A) cost in all situations. Identification with a Federal award rather than the nature of the goods and
services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal
awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include
depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general
administration and general expenses, such as the salaries and expenses of executive officers, personnel
administration, and accounting.
(c) Federal Agency Acceptance of Negotiated Indirect Cost Rates. (See also § 200.306.)
(1) The negotiated rates must be accepted by all Federal awarding agencies. A Federal awarding agency
may use a rate different from the negotiated rate for a class of Federal awards or a single Federal
award only when required by Federal statute or regulation, or when approved by a Federal awarding
agency head or delegate based on documented justification as described in paragraph (c)(3) of this
section.
(2) The Federal awarding agency head or delegate must notify OMB of any approved deviations.
(3) The Federal awarding agency must implement, and make publicly available, the policies, procedures
and general decision-making criteria that their programs will follow to seek and justify deviations
from negotiated rates.
(4) As required under § 200.204, the Federal awarding agency must include in the notice of funding
opportunity the policies relating to indirect cost rate reimbursement, matching, or cost share as
approved under paragraph (e)(1) of this section. As appropriate, the Federal agency should
incorporate discussion of these policies into Federal awarding agency outreach activities with nonFederal entities prior to the posting of a notice of funding opportunity.
(d) Pass-through entities are subject to the requirements in § 200.332(a)(4).
(e) Requirements for development and submission of indirect (F&A) cost rate proposals and cost allocation
plans are contained in Appendices III–VII and Appendix IX as follows:
(1) Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination
for Institutions of Higher Education (IHEs);

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(2) Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination
for Nonprofit Organizations;
(3) Appendix V to Part 200—State/Local Governmentwide Central Service Cost Allocation Plans;
(4) Appendix VI to Part 200—Public Assistance Cost Allocation Plans;
(5) Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals;
and
(6) Appendix IX to Part 200—Hospital Cost Principles.
(f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal
entity that does not have a current negotiated (including provisional) rate, except for those non-Federal
entities described in appendix VII to this part, paragraph D.1.b, may elect to charge a de minimis rate of
10% of modified total direct costs (MTDC) which may be used indefinitely. No documentation is required
to justify the 10% de minimis indirect cost rate. As described in § 200.403, costs must be consistently
charged as either indirect or direct costs, but may not be double charged or inconsistently charged as
both. If chosen, this methodology once elected must be used consistently for all Federal awards until
such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply
to do at any time.
(g) Any non-Federal entity that has a current federally-negotiated indirect cost rate may apply for a one-time
extension of the rates in that agreement for a period of up to four years. This extension will be subject to
the review and approval of the cognizant agency for indirect costs. If an extension is granted the nonFederal entity may not request a rate review until the extension period ends. At the end of the 4-year
extension, the non-Federal entity must re-apply to negotiate a rate. Subsequent one-time extensions (up to
four years) are permitted if a renegotiation is completed between each extension request.
(h) The federally negotiated indirect rate, distribution base, and rate type for a non-Federal entity (except for
the Indian tribes or tribal organizations, as defined in the Indian Self Determination, Education and
Assistance Act, 25 U.S.C. 450b(1)) must be available publicly on an OMB-designated Federal website.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020]

§ 200.415 Required certifications.
Required certifications include:
(a) To assure that expenditures are proper and in accordance with the terms and conditions of the Federal
award and approved project budgets, the annual and final fiscal reports or vouchers requesting payment
under the agreements must include a certification, signed by an official who is authorized to legally bind
the non-Federal entity, which reads as follows: “By signing this report, I certify to the best of my
knowledge and belief that the report is true, complete, and accurate, and the expenditures, disbursements
and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal
award. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact,
may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or
otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729–3730 and 3801–3812).”
(b) Certification of cost allocation plan or indirect (F&A) cost rate proposal. Each cost allocation plan or
indirect (F&A) cost rate proposal must comply with the following:
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(1) A proposal to establish a cost allocation plan or an indirect (F&A) cost rate, whether submitted to a
Federal cognizant agency for indirect costs or maintained on file by the non-Federal entity, must be
certified by the non-Federal entity using the Certificate of Cost Allocation Plan or Certificate of
Indirect Costs as set forth in appendices III through VII, and IX of this part. The certificate must be
signed on behalf of the non-Federal entity by an individual at a level no lower than vice president or
chief financial officer of the non-Federal entity that submits the proposal.
(2) Unless the non-Federal entity has elected the option under § 200.414(f), the Federal Government may
either disallow all indirect (F&A) costs or unilaterally establish such a plan or rate when the nonFederal entity fails to submit a certified proposal for establishing such a plan or rate in accordance
with the requirements. Such a plan or rate may be based upon audited historical data or such other
data that have been furnished to the cognizant agency for indirect costs and for which it can be
demonstrated that all unallowable costs have been excluded. When a cost allocation plan or indirect
cost rate is unilaterally established by the Federal Government because the non-Federal entity failed
to submit a certified proposal, the plan or rate established will be set to ensure that potentially
unallowable costs will not be reimbursed.
(c) Certifications by nonprofit organizations as appropriate that they did not meet the definition of a major
nonprofit organization as defined in § 200.414(a).
(d) See also § 200.450 for another required certification.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, 2020]

SPECIAL CONSIDERATIONS FOR STATES, LOCAL GOVERNMENTS AND INDIAN TRIBES
§ 200.416 Cost allocation plans and indirect cost proposals.
(a) For states, local governments and Indian tribes, certain services, such as motor pools, computer centers,
purchasing, accounting, etc., are provided to operating agencies on a centralized basis. Since Federal
awards are performed within the individual operating agencies, there needs to be a process whereby
these central service costs can be identified and assigned to benefitted activities on a reasonable and
consistent basis. The central service cost allocation plan provides that process.
(b) Individual operating agencies (governmental department or agency), normally charge Federal awards for
indirect costs through an indirect cost rate. A separate indirect cost rate(s) proposal for each operating
agency is usually necessary to claim indirect costs under Federal awards. Indirect costs include:
(1) The indirect costs originating in each department or agency of the governmental unit carrying out
Federal awards and
(2) The costs of central governmental services distributed through the central service cost allocation
plan and not otherwise treated as direct costs.
(c) The requirements for development and submission of cost allocation plans (for central service costs and
public assistance programs) and indirect cost rate proposals are contained in appendices V, VI and VII to
this part.
[78 FR 78608, Dec. 26, 2013, as amended at 86 FR 10440, Feb. 22, 2021]

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§ 200.417 Interagency service.
The cost of services provided by one agency to another within the governmental unit may include allowable direct
costs of the service plus a pro-rated share of indirect costs. A standard indirect cost allowance equal to ten percent
of the direct salary and wage cost of providing the service (excluding overtime, shift premiums, and fringe benefits)
may be used in lieu of determining the actual indirect costs of the service. These services do not include centralized
services included in central service cost allocation plans as described in Appendix V to Part 200.
[85 FR 49564, Aug. 13, 2020]

SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF HIGHER EDUCATION
§ 200.418 Costs incurred by states and local governments.
Costs incurred or paid by a state or local government on behalf of its IHEs for fringe benefit programs, such as
pension costs and FICA and any other costs specifically incurred on behalf of, and in direct benefit to, the IHEs, are
allowable costs of such IHEs whether or not these costs are recorded in the accounting records of the institutions,
subject to the following:
(a) The costs meet the requirements of § 200.402–411 of this subpart;
(b) The costs are properly supported by approved cost allocation plans in accordance with applicable Federal
cost accounting principles in this part; and
(c) The costs are not otherwise borne directly or indirectly by the Federal Government.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

§ 200.419 Cost accounting standards and disclosure statement.
(a) An IHE that receive an aggregate total $50 million or more in Federal awards and instruments subject to
this subpart (as specified in § 200.101) in its most recently completed fiscal year must comply with the
Cost Accounting Standards Board's cost accounting standards located at 48 CFR 9905.501, 9905.502,
9905.505, and 9905.506. CAS-covered contracts and subcontracts awarded to the IHEs are subject to the
broader range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part 30 (FAR Part 30).
(b) Disclosure statement. An IHE that receives an aggregate total $50 million or more in Federal awards and
instruments subject to this subpart (as specified in § 200.101) during its most recently completed fiscal
year must disclose their cost accounting practices by filing a Disclosure Statement (DS–2), which is
reproduced in Appendix III to Part 200. With the approval of the cognizant agency for indirect costs, an
IHE may meet the DS–2 submission by submitting the DS–2 for each business unit that received $50
million or more in Federal awards and instruments.
(1) The DS–2 must be submitted to the cognizant agency for indirect costs with a copy to the IHE's
cognizant agency for audit. The initial DS–2 and revisions to the DS–2 must be submitted in
coordination with the IHE's indirect (F&A) rate proposal, unless an earlier submission is requested by
the cognizant agency for indirect costs. IHEs with CAS-covered contracts or subcontracts meeting
the dollar threshold in 48 CFR 9903.202–1(f) must submit their initial DS–2 or revisions no later than
prior to the award of a CAS-covered contract or subcontract.

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(2) An IHE must maintain an accurate DS–2 and comply with disclosed cost accounting practices. An
IHE must file amendments to the DS–2 to the cognizant agency for indirect costs in advance of a
disclosed practice being changed to comply with a new or modified standard, or when a practice is
changed for other reasons. An IHE may proceed with implementing the change after it has notified
the Federal cognizant agency for indirect costs. If the change represents a variation from 2 CFR part
200, the change may require approval by the Federal cognizant agency for indirect costs, in
accordance with § 200.102(b). Amendments of a DS–2 may be submitted at any time.
Resubmission of a complete, updated DS–2 is discouraged except when there are extensive
changes to disclosed practices.
(3) Cost and funding adjustments. Cost adjustments must be made by the cognizant agency for indirect
costs if an IHE fails to comply with the cost policies in this part or fails to consistently follow its
established or disclosed cost accounting practices when estimating, accumulating or reporting the
costs of Federal awards, and the aggregate cost impact on Federal awards is material. The cost
adjustment must normally be made on an aggregate basis for all affected Federal awards through
an adjustment of the IHE's future F&A costs rates or other means considered appropriate by the
cognizant agency for indirect costs. Under the terms of CAS covered contracts, adjustments in the
amount of funding provided may also be required when the estimated proposal costs were not
determined in accordance with established cost accounting practices.
(4) Overpayments. Excess amounts paid in the aggregate by the Federal Government under Federal
awards due to a noncompliant cost accounting practice used to estimate, accumulate, or report
costs must be credited or refunded, as deemed appropriate by the cognizant agency for indirect
costs. Interest applicable to the excess amounts paid in the aggregate during the period of
noncompliance must also be determined and collected in accordance with applicable Federal
agency regulations.
(5) Compliant cost accounting practice changes. Changes from one compliant cost accounting practice
to another compliant practice that are approved by the cognizant agency for indirect costs may
require cost adjustments if the change has a material effect on Federal awards and the changes are
deemed appropriate by the cognizant agency for indirect costs.
(6) Responsibilities. The cognizant agency for indirect cost must:
(i)

Determine cost adjustments for all Federal awards in the aggregate on behalf of the Federal
Government. Actions of the cognizant agency for indirect cost in making cost adjustment
determinations must be coordinated with all affected Federal awarding agencies to the extent
necessary.

(ii) Prescribe guidelines and establish internal procedures to promptly determine on behalf of the
Federal Government that a DS–2 adequately discloses the IHE's cost accounting practices and
that the disclosed practices are compliant with applicable CAS and the requirements of this
part.
(iii) Distribute to all affected Federal awarding agencies any DS–2 determination of adequacy or
noncompliance.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13, 2020]

GENERAL PROVISIONS FOR SELECTED ITEMS OF COST
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§ 200.420 Considerations for selected items of cost.
This section provides principles to be applied in establishing the allowability of certain items involved in determining
cost, in addition to the requirements of Subtitle II of this subpart. These principles apply whether or not a particular
item of cost is properly treated as direct cost or indirect (F&A) cost. Failure to mention a particular item of cost is
not intended to imply that it is either allowable or unallowable; rather, determination as to allowability in each case
should be based on the treatment provided for similar or related items of cost, and based on the principles
described in §§ 200.402 through 200.411. In case of a discrepancy between the provisions of a specific Federal
award and the provisions below, the Federal award governs. Criteria outlined in § 200.403 must be applied in
determining allowability. See also § 200.102.
[85 FR 49564, Aug. 13, 2020]

§ 200.421 Advertising and public relations.
(a) The term advertising costs means the costs of advertising media and corollary administrative costs.
Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or
computer transmittals, and the like.
(b) The only allowable advertising costs are those which are solely for:
(1) The recruitment of personnel required by the non-Federal entity for performance of a Federal award
(See also § 200.463);
(2) The procurement of goods and services for the performance of a Federal award;
(3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except
when non-Federal entities are reimbursed for disposal costs at a predetermined amount; or
(4) Program outreach and other specific purposes necessary to meet the requirements of the Federal
award.
(c) The term “public relations” includes community relations and means those activities dedicated to
maintaining the image of the non-Federal entity or maintaining or promoting understanding and favorable
relations with the community or public at large or any segment of the public.
(d) The only allowable public relations costs are:
(1) Costs specifically required by the Federal award;
(2) Costs of communicating with the public and press pertaining to specific activities or
accomplishments which result from performance of the Federal award (these costs are considered
necessary as part of the outreach effort for the Federal award); or
(3) Costs of conducting general liaison with news media and government public relations officers, to the
extent that such activities are limited to communication and liaison necessary to keep the public
informed on matters of public concern, such as notices of funding opportunities, financial matters,
etc.
(e) Unallowable advertising and public relations costs include the following:
(1) All advertising and public relations costs other than as specified in paragraphs (b) and (d) of this
section;

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(2) Costs of meetings, conventions, convocations, or other events related to other activities of the entity
(see also § 200.432), including:
(i)

Costs of displays, demonstrations, and exhibits;

(ii) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with
shows and other special events; and
(iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making
demonstrations, and providing briefings;
(3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs;
(4) Costs of advertising and public relations designed solely to promote the non-Federal entity.
[78 FR 76808, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

§ 200.422 Advisory councils.
Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal
awarding agency or as an indirect cost where allocable to Federal awards. See § 200.444, applicable to States, local
governments, and Indian tribes.
[85 FR 49564, Aug. 13, 2020]

§ 200.423 Alcoholic beverages.
Costs of alcoholic beverages are unallowable.

§ 200.424 Alumni/ae activities.
Costs incurred by IHEs for, or in support of, alumni/ae activities are unallowable.

§ 200.425 Audit services.
(a) A reasonably proportionate share of the costs of audits required by, and performed in accordance with,
the Single Audit Act Amendments of 1996 (31 U.S.C. 7501–7507), as implemented by requirements of
this part, are allowable. However, the following audit costs are unallowable:
(1) Any costs when audits required by the Single Audit Act and subpart F of this part have not been
conducted or have been conducted but not in accordance therewith; and
(2) Any costs of auditing a non-Federal entity that is exempted from having an audit conducted under
the Single Audit Act and subpart F of this part because its expenditures under Federal awards are
less than $750,000 during the non-Federal entity's fiscal year.
(b) The costs of a financial statement audit of a non-Federal entity that does not currently have a Federal
award may be included in the indirect cost pool for a cost allocation plan or indirect cost proposal.
(c) Pass-through entities may charge Federal awards for the cost of agreed-upon-procedures engagements to
monitor subrecipients (in accordance with subpart D, §§ 200.331–333) who are exempted from the
requirements of the Single Audit Act and subpart F of this part. This cost is allowable only if the agreedupon-procedures engagements are:
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(1) Conducted in accordance with GAGAS attestation standards;
(2) Paid for and arranged by the pass-through entity; and
(3) Limited in scope to one or more of the following types of compliance requirements: activities
allowed or unallowed; allowable costs/cost principles; eligibility; and reporting.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49564, Aug. 13, 2020]

§ 200.426 Bad debts.
Bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated)
arising from uncollectable accounts and other claims, are unallowable. Related collection costs, and related legal
costs, arising from such debts after they have been determined to be uncollectable are also unallowable. See also §
200.428.
[85 FR 49565, Aug. 13, 2020]

§ 200.427 Bonding costs.
(a) Bonding costs arise when the Federal awarding agency requires assurance against financial loss to itself
or others by reason of the act or default of the non-Federal entity. They arise also in instances where the
non-Federal entity requires similar assurance, including: bonds as bid, performance, payment, advance
payment, infringement, and fidelity bonds for employees and officials.
(b) Costs of bonding required pursuant to the terms and conditions of the Federal award are allowable.
(c) Costs of bonding required by the non-Federal entity in the general conduct of its operations are allowable
as an indirect cost to the extent that such bonding is in accordance with sound business practice and the
rates and premiums are reasonable under the circumstances.

§ 200.428 Collections of improper payments.
The costs incurred by a non-Federal entity to recover improper payments are allowable as either direct or indirect
costs, as appropriate. Amounts collected may be used by the non-Federal entity in accordance with cash
management standards set forth in § 200.305.
[85 FR 49565, Aug. 13, 2020]

§ 200.429 Commencement and convocation costs.
For IHEs, costs incurred for commencements and convocations are unallowable, except as provided for in (B)(9)
Student Administration and Services, in appendix III to this part, as activity costs.
[85 FR 49565, Aug. 13, 2020]

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§ 200.430 Compensation—personal services.
(a) General. Compensation for personal services includes all remuneration, paid currently or accrued, for
services of employees rendered during the period of performance under the Federal award, including but
not necessarily limited to wages and salaries. Compensation for personal services may also include
fringe benefits which are addressed in § 200.431. Costs of compensation are allowable to the extent that
they satisfy the specific requirements of this part, and that the total compensation for individual
employees:
(1) Is reasonable for the services rendered and conforms to the established written policy of the nonFederal entity consistently applied to both Federal and non-Federal activities;
(2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written
policies and meets the requirements of Federal statute, where applicable; and
(3) Is determined and supported as provided in paragraph (i) of this section, when applicable.
(b) Reasonableness. Compensation for employees engaged in work on Federal awards will be considered
reasonable to the extent that it is consistent with that paid for similar work in other activities of the nonFederal entity. In cases where the kinds of employees required for Federal awards are not found in the
other activities of the non-Federal entity, compensation will be considered reasonable to the extent that it
is comparable to that paid for similar work in the labor market in which the non-Federal entity competes
for the kind of employees involved.
(c) Professional activities outside the non-Federal entity. Unless an arrangement is specifically authorized by
a Federal awarding agency, a non-Federal entity must follow its written non-Federal entity-wide policies
and practices concerning the permissible extent of professional services that can be provided outside the
non-Federal entity for non-organizational compensation. Where such non-Federal entity-wide written
policies do not exist or do not adequately define the permissible extent of consulting or other nonorganizational activities undertaken for extra outside pay, the Federal Government may require that the
effort of professional staff working on Federal awards be allocated between:
(1) Non-Federal entity activities, and
(2) Non-organizational professional activities. If the Federal awarding agency considers the extent of
non-organizational professional effort excessive or inconsistent with the conflicts-of-interest terms
and conditions of the Federal award, appropriate arrangements governing compensation will be
negotiated on a case-by-case basis.
(d) Unallowable costs.
(1) Costs which are unallowable under other sections of these principles must not be allowable under
this section solely on the basis that they constitute personnel compensation.
(2) The allowable compensation for certain employees is subject to a ceiling in accordance with statute.
For the amount of the ceiling for cost-reimbursement contracts, the covered compensation subject
to the ceiling, the covered employees, and other relevant provisions, see 10 U.S.C. 2324(e)(1)(P), and
41 U.S.C. 1127 and 4304(a)(16). For other types of Federal awards, other statutory ceilings may
apply.

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(e) Special considerations. Special considerations in determining allowability of compensation will be given to
any change in a non-Federal entity's compensation policy resulting in a substantial increase in its
employees' level of compensation (particularly when the change was concurrent with an increase in the
ratio of Federal awards to other activities) or any change in the treatment of allowability of specific types
of compensation due to changes in Federal policy.
(f) Incentive compensation. Incentive compensation to employees based on cost reduction, or efficient
performance, suggestion awards, safety awards, etc., is allowable to the extent that the overall
compensation is determined to be reasonable and such costs are paid or accrued pursuant to an
agreement entered into in good faith between the non-Federal entity and the employees before the
services were rendered, or pursuant to an established plan followed by the non-Federal entity so
consistently as to imply, in effect, an agreement to make such payment.
(g) Nonprofit organizations. For compensation to members of nonprofit organizations, trustees, directors,
associates, officers, or the immediate families thereof, determination must be made that such
compensation is reasonable for the actual personal services rendered rather than a distribution of
earnings in excess of costs. This may include director's and executive committee member's fees,
incentive awards, allowances for off-site pay, incentive pay, location allowances, hardship pay, and costof-living differentials.
(h) Institutions of Higher Education (IHEs).
(1) Certain conditions require special consideration and possible limitations in determining allowable
personnel compensation costs under Federal awards. Among such conditions are the following:
(i)

Allowable activities. Charges to Federal awards may include reasonable amounts for activities
contributing and directly related to work under an agreement, such as delivering special
lectures about specific aspects of the ongoing activity, writing reports and articles, developing
and maintaining protocols (human, animals, etc.), managing substances/chemicals, managing
and securing project-specific data, coordinating research subjects, participating in appropriate
seminars, consulting with colleagues and graduate students, and attending meetings and
conferences.

(ii) Incidental activities. Incidental activities for which supplemental compensation is allowable
under written institutional policy (at a rate not to exceed institutional base salary) need not be
included in the records described in paragraph (i) of this section to directly charge payments of
incidental activities, such activities must either be specifically provided for in the Federal award
budget or receive prior written approval by the Federal awarding agency.
(2) Salary basis. Charges for work performed on Federal awards by faculty members during the
academic year are allowable at the IBS rate. Except as noted in paragraph (h)(1)(ii) of this section, in
no event will charges to Federal awards, irrespective of the basis of computation, exceed the
proportionate share of the IBS for that period. This principle applies to all members of faculty at an
institution. IBS is defined as the annual compensation paid by an IHE for an individual's appointment,
whether that individual's time is spent on research, instruction, administration, or other activities. IBS
excludes any income that an individual earns outside of duties performed for the IHE. Unless there is
prior approval by the Federal awarding agency, charges of a faculty member's salary to a Federal
award must not exceed the proportionate share of the IBS for the period during which the faculty
member worked on the award.

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(3) Intra-Institution of Higher Education (IHE) consulting. Intra-IHE consulting by faculty should be
undertaken as an IHE responsibility requiring no compensation in addition to IBS. However, in
unusual cases where consultation is across departmental lines or involves a separate or remote
operation, and the work performed by the faculty member is in addition to his or her regular
responsibilities, any charges for such work representing additional compensation above IBS are
allowable provided that such consulting arrangements are specifically provided for in the Federal
award or approved in writing by the Federal awarding agency.
(4) Extra Service Pay normally represents overload compensation, subject to institutional compensation
policies for services above and beyond IBS. Where extra service pay is a result of Intra-IHE
consulting, it is subject to the same requirements of paragraph (b) above. It is allowable if all of the
following conditions are met:
(i)

The non-Federal entity establishes consistent written policies which apply uniformly to all
faculty members, not just those working on Federal awards.

(ii) The non-Federal entity establishes a consistent written definition of work covered by IBS which
is specific enough to determine conclusively when work beyond that level has occurred. This
may be described in appointment letters or other documentations.
(iii) The supplementation amount paid is commensurate with the IBS rate of pay and the amount of
additional work performed. See paragraph (h)(2) of this section.
(iv) The salaries, as supplemented, fall within the salary structure and pay ranges established by
and documented in writing or otherwise applicable to the non-Federal entity.
(v) The total salaries charged to Federal awards including extra service pay are subject to the
Standards of Documentation as described in paragraph (i) of this section.
(5) Periods outside the academic year.
(i)

Except as specified for teaching activity in paragraph (h)(5)(ii) of this section, charges for work
performed by faculty members on Federal awards during periods not included in the base
salary period will be at a rate not in excess of the IBS.

(ii) Charges for teaching activities performed by faculty members on Federal awards during
periods not included in IBS period will be based on the normal written policy of the IHE
governing compensation to faculty members for teaching assignments during such periods.
(6) Part-time faculty. Charges for work performed on Federal awards by faculty members having only
part-time appointments will be determined at a rate not in excess of that regularly paid for part-time
assignments.
(7) Sabbatical leave costs. Rules for sabbatical leave are as follow:
(i)

Costs of leaves of absence by employees for performance of graduate work or sabbatical
study, travel, or research are allowable provided the IHE has a uniform written policy on
sabbatical leave for persons engaged in instruction and persons engaged in research. Such
costs will be allocated on an equitable basis among all related activities of the IHE.

(ii) Where sabbatical leave is included in fringe benefits for which a cost is determined for
assessment as a direct charge, the aggregate amount of such assessments applicable to all
work of the institution during the base period must be reasonable in relation to the IHE's actual
experience under its sabbatical leave policy.
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(8) Salary rates for non-faculty members. Non-faculty full-time professional personnel may also earn
“extra service pay” in accordance with the non-Federal entity's written policy and consistent with
paragraph (h)(1)(i) of this section.
(i)

Standards for Documentation of Personnel Expenses
(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect
the work performed. These records must:
(i)

Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;

(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of
IBS);
(iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on
an integrated basis, but may include the use of subsidiary records as defined in the non-Federal
entity's written policy;
(v) Comply with the established accounting policies and practices of the non-Federal entity (See
paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the employee's salary or wages among specific activities or cost
objectives if the employee works on more than one Federal award; a Federal award and nonFederal award; an indirect cost activity and a direct cost activity; two or more indirect activities
which are allocated using different allocation bases; or an unallowable activity and a direct or
indirect cost activity.
(viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not
qualify as support for charges to Federal awards, but may be used for interim accounting
purposes, provided that:
(A) The system for establishing the estimates produces reasonable approximations of the
activity actually performed;
(B) Significant changes in the corresponding work activity (as defined by the non-Federal
entity's written policies) are identified and entered into the records in a timely manner.
Short term (such as one or two months) fluctuation between workload categories need
not be considered as long as the distribution of salaries and wages is reasonable over the
longer term; and
(C) The non-Federal entity's system of internal controls includes processes to review after-thefact interim charges made to a Federal award based on budget estimates. All necessary
adjustment must be made such that the final amount charged to the Federal award is
accurate, allowable, and properly allocated.
(ix) Because practices vary as to the activity constituting a full workload (for IHEs, IBS), records
may reflect categories of activities expressed as a percentage distribution of total activities.

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(x) It is recognized that teaching, research, service, and administration are often inextricably
intermingled in an academic setting. When recording salaries and wages charged to Federal
awards for IHEs, a precise assessment of factors that contribute to costs is therefore not
always feasible, nor is it expected.
(2) For records which meet the standards required in paragraph (i)(1) of this section, the non-Federal
entity will not be required to provide additional support or documentation for the work performed,
other than that referenced in paragraph (i)(3) of this section.
(3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act
(FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition
to the supporting documentation described in this section, must also be supported by records
indicating the total number of hours worked each day.
(4) Salaries and wages of employees used in meeting cost sharing or matching requirements on Federal
awards must be supported in the same manner as salaries and wages claimed for reimbursement
from Federal awards.
(5) For states, local governments and Indian tribes, substitute processes or systems for allocating
salaries and wages to Federal awards may be used in place of or in addition to the records described
in paragraph (1) if approved by the cognizant agency for indirect cost. Such systems may include,
but are not limited to, random moment sampling, “rolling” time studies, case counts, or other
quantifiable measures of work performed.
(i)

Substitute systems which use sampling methods (primarily for Temporary Assistance for
Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and
other public assistance programs) must meet acceptable statistical sampling standards
including:
(A) The sampling universe must include all of the employees whose salaries and wages are to
be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this
section;
(B) The entire time period involved must be covered by the sample; and
(C) The results must be statistically valid and applied to the period being sampled.

(ii) Allocating charges for the sampled employees' supervisors, clerical and support staffs, based
on the results of the sampled employees, will be acceptable.
(iii) Less than full compliance with the statistical sampling standards noted in subsection (5)(i) may
be accepted by the cognizant agency for indirect costs if it concludes that the amounts to be
allocated to Federal awards will be minimal, or if it concludes that the system proposed by the
non-Federal entity will result in lower costs to Federal awards than a system which complies
with the standards.
(6) Cognizant agencies for indirect costs are encouraged to approve alternative proposals based on
outcomes and milestones for program performance where these are clearly documented. Where
approved by the Federal cognizant agency for indirect costs, these plans are acceptable as an
alternative to the requirements of paragraph (i)(1) of this section.

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(7) For Federal awards of similar purpose activity or instances of approved blended funding, a nonFederal entity may submit performance plans that incorporate funds from multiple Federal awards
and account for their combined use based on performance-oriented metrics, provided that such
plans are approved in advance by all involved Federal awarding agencies. In these instances, the
non-Federal entity must submit a request for waiver of the requirements based on documentation
that describes the method of charging costs, relates the charging of costs to the specific activity
that is applicable to all fund sources, and is based on quantifiable measures of the activity in relation
to time charged.
(8) For a non-Federal entity where the records do not meet the standards described in this section, the
Federal Government may require personnel activity reports, including prescribed certifications, or
equivalent documentation that support the records as required in this section.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13, 2020]

§ 200.431 Compensation—fringe benefits.
(a) General. Fringe benefits are allowances and services provided by employers to their employees as
compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the
costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and
unemployment benefit plans. Except as provided elsewhere in these principles, the costs of fringe
benefits are allowable provided that the benefits are reasonable and are required by law, non-Federal
entity-employee agreement, or an established policy of the non-Federal entity.
(b) Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods
of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays,
court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the
following criteria are met:
(1) They are provided under established written leave policies;
(2) The costs are equitably allocated to all related activities, including Federal awards; and,
(3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently
followed by the non-Federal entity or specified grouping of employees.
(i)

When a non-Federal entity uses the cash basis of accounting, the cost of leave is recognized in
the period that the leave is taken and paid for. Payments for unused leave when an employee
retires or terminates employment are allowable in the year of payment.

(ii) The accrual basis may be only used for those types of leave for which a liability as defined by
GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of
accounting, allowable leave costs are the lesser of the amount accrued or funded.
(c) Fringe benefits. The cost of fringe benefits in the form of employer contributions or expenses for social
security; employee life, health, unemployment, and worker's compensation insurance (except as indicated
in § 200.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are
allowable, provided such benefits are granted under established written policies. Such benefits, must be
allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits
attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such
Federal awards and other activities, and charged as direct or indirect costs in accordance with the nonFederal entity's accounting practices.
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(d) Cost objectives. Fringe benefits may be assigned to cost objectives by identifying specific benefits to
specific individual employees or by allocating on the basis of entity-wide salaries and wages of the
employees receiving the benefits. When the allocation method is used, separate allocations must be
made to selective groupings of employees, unless the non-Federal entity demonstrates that costs in
relationship to salaries and wages do not differ significantly for different groups of employees.
(e) Insurance. See also § 200.447(d)(1) and (2).
(1) Provisions for a reserve under a self-insurance program for unemployment compensation or workers'
compensation are allowable to the extent that the provisions represent reasonable estimates of the
liabilities for such compensation, and the types of coverage, extent of coverage, and rates and
premiums would have been allowable had insurance been purchased to cover the risks. However,
provisions for self-insured liabilities which do not become payable for more than one year after the
provision is made must not exceed the present value of the liability.
(2) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar
responsibility are allowable only to the extent that the insurance represents additional
compensation. The costs of such insurance when the non-Federal entity is named as beneficiary are
unallowable.
(3) Actual claims paid to or on behalf of employees or former employees for workers' compensation,
unemployment compensation, severance pay, and similar employee benefits (e.g., post-retirement
health benefits), are allowable in the year of payment provided that the non-Federal entity follows a
consistent costing policy.
(f) Automobiles. That portion of automobile costs furnished by the non-Federal entity that relates to personal
use by employees (including transportation to and from work) is unallowable as fringe benefit or indirect
(F&A) costs regardless of whether the cost is reported as taxable income to the employees.
(g) Pension plan costs. Pension plan costs which are incurred in accordance with the established policies of
the non-Federal entity are allowable, provided that:
(1) Such policies meet the test of reasonableness.
(2) The methods of cost allocation are not discriminatory.
(3) Except for State and Local Governments, the cost assigned to each fiscal year should be determined
in accordance with GAAP.
(4) The costs assigned to a given fiscal year are funded for all plan participants within six months after
the end of that year. However, increases to normal and past service pension costs caused by a delay
in funding the actuarial liability beyond 30 calendar days after each quarter of the year to which such
costs are assignable are unallowable. Non-Federal entity may elect to follow the “Cost Accounting
Standard for Composition and Measurement of Pension Costs” (48 CFR 9904.412).
(5) Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income
Security Act (ERISA) of 1974 (29 U.S.C. 1301–1461) are allowable. Late payment charges on such
premiums are unallowable. Excise taxes on accumulated funding deficiencies and other penalties
imposed under ERISA are unallowable.
(6) Pension plan costs may be computed using a pay-as-you-go method or an acceptable actuarial cost
method in accordance with established written policies of the non-Federal entity.

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(i)

2 CFR 200.431(g)(6)(i)

For pension plans financed on a pay-as-you-go method, allowable costs will be limited to those
representing actual payments to retirees or their beneficiaries.

(ii) Pension costs calculated using an actuarial cost-based method recognized by GAAP are
allowable for a given fiscal year if they are funded for that year within six months after the end
of that year. Costs funded after the six-month period (or a later period agreed to by the
cognizant agency for indirect costs) are allowable in the year funded. The cognizant agency for
indirect costs may agree to an extension of the six-month period if an appropriate adjustment is
made to compensate for the timing of the charges to the Federal Government and related
Federal reimbursement and the non-Federal entity's contribution to the pension fund.
Adjustments may be made by cash refund or other equitable procedures to compensate the
Federal Government for the time value of Federal reimbursements in excess of contributions to
the pension fund.
(iii) Amounts funded by the non-Federal entity in excess of the actuarially determined amount for a
fiscal year may be used as the non-Federal entity's contribution in future periods.
(iv) When a non-Federal entity converts to an acceptable actuarial cost method, as defined by GAAP,
and funds pension costs in accordance with this method, the unfunded liability at the time of
conversion is allowable if amortized over a period of years in accordance with GAAP.
(v) The Federal Government must receive an equitable share of any previously allowed pension
costs (including earnings thereon) which revert or inure to the non-Federal entity in the form of
a refund, withdrawal, or other credit.
(h) Post-retirement health. Post-retirement health plans (PRHP) refers to costs of health insurance or health
services not included in a pension plan covered by paragraph (g) of this section for retirees and their
spouses, dependents, and survivors. PRHP costs may be computed using a pay-as-you-go method or an
acceptable actuarial cost method in accordance with established written policies of the non-Federal
entity.
(1) For PRHP financed on a pay-as-you-go method, allowable costs will be limited to those representing
actual payments to retirees or their beneficiaries.
(2) PRHP costs calculated using an actuarial cost method recognized by GAAP are allowable if they are
funded for that year within six months after the end of that year. Costs funded after the six-month
period (or a later period agreed to by the cognizant agency) are allowable in the year funded. The
Federal cognizant agency for indirect costs may agree to an extension of the six-month period if an
appropriate adjustment is made to compensate for the timing of the charges to the Federal
Government and related Federal reimbursements and the non-Federal entity's contributions to the
PRHP fund. Adjustments may be made by cash refund, reduction in current year's PRHP costs, or
other equitable procedures to compensate the Federal Government for the time value of Federal
reimbursements in excess of contributions to the PRHP fund.
(3) Amounts funded in excess of the actuarially determined amount for a fiscal year may be used as the
non-Federal entity contribution in a future period.
(4) When a non-Federal entity converts to an acceptable actuarial cost method and funds PRHP costs in
accordance with this method, the initial unfunded liability attributable to prior years is allowable if
amortized over a period of years in accordance with GAAP, or, if no such GAAP period exists, over a
period negotiated with the cognizant agency for indirect costs.

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(5) To be allowable in the current year, the PRHP costs must be paid either to:
(i)

An insurer or other benefit provider as current year costs or premiums, or

(ii) An insurer or trustee to maintain a trust fund or reserve for the sole purpose of providing postretirement benefits to retirees and other beneficiaries.
(6) The Federal Government must receive an equitable share of any amounts of previously allowed postretirement benefit costs (including earnings thereon) which revert or inure to the non-Federal entity in
the form of a refund, withdrawal, or other credit.
(i)

Severance pay.
(1) Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular
salaries and wages, by non-Federal entities to workers whose employment is being terminated.
Costs of severance pay are allowable only to the extent that in each case, it is required by
(i)

Law;

(ii) Employer-employee agreement;
(iii) Established policy that constitutes, in effect, an implied agreement on the non-Federal entity's
part; or
(iv) Circumstances of the particular employment.
(2) Costs of severance payments are divided into two categories as follows:
(i)

Actual normal turnover severance payments must be allocated to all activities; or, where the
non-Federal entity provides for a reserve for normal severances, such method will be
acceptable if the charge to current operations is reasonable in light of payments actually made
for normal severances over a representative past period, and if amounts charged are allocated
to all activities of the non-Federal entity.

(ii) Measurement of costs of abnormal or mass severance pay by means of an accrual will not
achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the
Federal Government recognizes its responsibility to participate, to the extent of its fair share, in
any specific payment. Prior approval by the Federal awarding agency or cognizant agency for
indirect cost, as appropriate, is required.
(3) Costs incurred in certain severance pay packages which are in an amount in excess of the normal
severance pay paid by the non-Federal entity to an employee upon termination of employment and
are paid to the employee contingent upon a change in management control over, or ownership of, the
non-Federal entity's assets, are unallowable.
(4) Severance payments to foreign nationals employed by the non-Federal entity outside the United
States, to the extent that the amount exceeds the customary or prevailing practices for the nonFederal entity in the United States, are unallowable, unless they are necessary for the performance of
Federal programs and approved by the Federal awarding agency.
(5) Severance payments to foreign nationals employed by the non-Federal entity outside the United
States due to the termination of the foreign national as a result of the closing of, or curtailment of
activities by, the non-Federal entity in that country, are unallowable, unless they are necessary for the
performance of Federal programs and approved by the Federal awarding agency.
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(j)

2 CFR 200.431(j)

For IHEs only.
(1) Fringe benefits in the form of undergraduate and graduate tuition or remission of tuition for individual
employees are allowable, provided such benefits are granted in accordance with established nonFederal entity policies, and are distributed to all non-Federal entity activities on an equitable basis.
Tuition benefits for family members other than the employee are unallowable.
(2) Fringe benefits in the form of tuition or remission of tuition for individual employees not employed by
IHEs are limited to the tax-free amount allowed per section 127 of the Internal Revenue Code as
amended.
(3) IHEs may offer employees tuition waivers or tuition reductions, provided that the benefit does not
discriminate in favor of highly compensated employees. Employees can exercise these benefits at
other institutions according to institutional policy. See § 200.466, for treatment of tuition remission
provided to students.

(k) Fringe benefit programs and other benefit costs. For IHEs whose costs are paid by state or local
governments, fringe benefit programs (such as pension costs and FICA) and any other benefits costs
specifically incurred on behalf of, and in direct benefit to, the non-Federal entity, are allowable costs of
such non-Federal entities whether or not these costs are recorded in the accounting records of the nonFederal entities, subject to the following:
(1) The costs meet the requirements of Basic Considerations in §§ 200.402 through 200.411;
(2) The costs are properly supported by approved cost allocation plans in accordance with applicable
Federal cost accounting principles; and
(3) The costs are not otherwise borne directly or indirectly by the Federal Government.
[85 FR 49565, Aug. 13, 2020]

§ 200.432 Conferences.
A conference is defined as a meeting, retreat, seminar, symposium, workshop or event whose primary purpose is
the dissemination of technical information beyond the non-Federal entity and is necessary and reasonable for
successful performance under the Federal award. Allowable conference costs paid by the non-Federal entity as a
sponsor or host of the conference may include rental of facilities, speakers' fees, costs of meals and refreshments,
local transportation, and other items incidental to such conferences unless further restricted by the terms and
conditions of the Federal award. As needed, the costs of identifying, but not providing, locally available dependentcare resources are allowable. Conference hosts/sponsors must exercise discretion and judgment in ensuring that
conference costs are appropriate, necessary and managed in a manner that minimizes costs to the Federal award.
The Federal awarding agency may authorize exceptions where appropriate for programs including Indian tribes,
children, and the elderly. See also §§ 200.438, 200.456, and 200.475.
[85 FR 49567, Aug. 13, 2020]

§ 200.433 Contingency provisions.
(a) Contingency is that part of a budget estimate of future costs (typically of large construction projects, IT
systems, or other items as approved by the Federal awarding agency) which is associated with possible
events or conditions arising from causes the precise outcome of which is indeterminable at the time of
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estimate, and that experience shows will likely result, in aggregate, in additional costs for the approved
activity or project. Amounts for major project scope changes, unforeseen risks, or extraordinary events
may not be included.
(b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be
explicitly included in budget estimates, to the extent they are necessary to improve the precision of those
estimates. Amounts must be estimated using broadly-accepted cost estimating methodologies, specified
in the budget documentation of the Federal award, and accepted by the Federal awarding agency. As
such, contingency amounts are to be included in the Federal award. In order for actual costs incurred to
be allowable, they must comply with the cost principles and other requirements in this part (see also §§
200.300 and 200.403 of this part); be necessary and reasonable for proper and efficient accomplishment
of project or program objectives, and be verifiable from the non-Federal entity's records.
(c) Payments made by the Federal awarding agency to the non-Federal entity's “contingency reserve” or any
similar payment made for events the occurrence of which cannot be foretold with certainty as to the time
or intensity, or with an assurance of their happening, are unallowable, except as noted in §§ 200.431 and
200.447.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020]

§ 200.434 Contributions and donations.
(a) Costs of contributions and donations, including cash, property, and services, from the non-Federal entity
to other entities, are unallowable.
(b) The value of services and property donated to the non-Federal entity may not be charged to the Federal
award either as a direct or indirect (F&A) cost. The value of donated services and property may be used to
meet cost sharing or matching requirements (see § 200.306). Depreciation on donated assets is
permitted in accordance with § 200.436, as long as the donated property is not counted towards cost
sharing or matching requirements.
(c) Services donated or volunteered to the non-Federal entity may be furnished to a non-Federal entity by
professional and technical personnel, consultants, and other skilled and unskilled labor. The value of
these services may not be charged to the Federal award either as a direct or indirect cost. However, the
value of donated services may be used to meet cost sharing or matching requirements in accordance
with the provisions of § 200.306.
(d) To the extent feasible, services donated to the non-Federal entity will be supported by the same methods
used to support the allocability of regular personnel services.
(e) The following provisions apply to nonprofit organizations. The value of services donated to the nonprofit
organization utilized in the performance of a direct cost activity must be considered in the determination
of the non-Federal entity's indirect cost rate(s) and, accordingly, must be allocated a proportionate share
of applicable indirect costs when the following circumstances exist:
(1) The aggregate value of the services is material;
(2) The services are supported by a significant amount of the indirect costs incurred by the non-Federal
entity;

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(i)

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In those instances where there is no basis for determining the fair market value of the services
rendered, the non-Federal entity and the cognizant agency for indirect costs must negotiate an
appropriate allocation of indirect cost to the services.

(ii) Where donated services directly benefit a project supported by the Federal award, the indirect
costs allocated to the services will be considered as a part of the total costs of the project.
Such indirect costs may be reimbursed under the Federal award or used to meet cost sharing or
matching requirements.
(f) Fair market value of donated services must be computed as described in § 200.306.
(g) Personal Property and Use of Space.
(1) Donated personal property and use of space may be furnished to a non-Federal entity. The value of
the personal property and space may not be charged to the Federal award either as a direct or
indirect cost.
(2) The value of the donations may be used to meet cost sharing or matching share requirements under
the conditions described in § 200.300 of this part. The value of the donations must be determined in
accordance with § 200.300. Where donations are treated as indirect costs, indirect cost rates will
separate the value of the donations so that reimbursement will not be made.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, 2020]

§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and
patent infringements.
(a) Definitions for the purposes of this section.
(1) Conviction means a judgment or conviction of a criminal offense by any court of competent
jurisdiction, whether entered upon verdict or a plea, including a conviction due to a plea of nolo
contendere.
(2) Costs include the services of in-house or private counsel, accountants, consultants, or others
engaged to assist the non-Federal entity before, during, and after commencement of a judicial or
administrative proceeding, that bear a direct relationship to the proceeding.
(3) Fraud means:
(i)

Acts of fraud or corruption or attempts to defraud the Federal Government or to corrupt its
agents,

(ii) Acts that constitute a cause for debarment or suspension (as specified in agency regulations),
and
(iii) Acts which violate the False Claims Act (31 U.S.C. 3729–3732) or the Anti-kickback Act (41
U.S.C. 1320a–7b(b)).
(4) Penalty does not include restitution, reimbursement, or compensatory damages.
(5) Proceeding includes an investigation.
(b) Costs.

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(1) Except as otherwise described herein, costs incurred in connection with any criminal, civil or
administrative proceeding (including filing of a false certification) commenced by the Federal
Government, a state, local government, or foreign government, or joined by the Federal Government
(including a proceeding under the False Claims Act), against the non-Federal entity, (or commenced
by third parties or a current or former employee of the non-Federal entity who submits a
whistleblower complaint of reprisal in accordance with 10 U.S.C. 2409 or 41 U.S.C. 4712), are not
allowable if the proceeding:
(i)

Relates to a violation of, or failure to comply with, a Federal, state, local or foreign statute,
regulation or the terms and conditions of the Federal award, by the non-Federal entity (including
its agents and employees); and

(ii) Results in any of the following dispositions:
(A) In a criminal proceeding, a conviction.
(B) In a civil or administrative proceeding involving an allegation of fraud or similar
misconduct, a determination of non-Federal entity liability.
(C) In the case of any civil or administrative proceeding, the disallowance of costs or the
imposition of a monetary penalty, or an order issued by the Federal awarding agency head
or delegate to the non-Federal entity to take corrective action under 10 U.S.C. 2409 or 41
U.S.C. 4712.
(D) A final decision by an appropriate Federal official to debar or suspend the non-Federal
entity, to rescind or void a Federal award, or to terminate a Federal award by reason of a
violation or failure to comply with a statute, regulation, or the terms and conditions of the
Federal award.
(E) A disposition by consent or compromise, if the action could have resulted in any of the
dispositions described in paragraphs (b)(1)(ii)(A) through (D) of this section.
(2) If more than one proceeding involves the same alleged misconduct, the costs of all such
proceedings are unallowable if any results in one of the dispositions shown in paragraph (b) of this
section.
(c) If a proceeding referred to in paragraph (b) of this section is commenced by the Federal Government and
is resolved by consent or compromise pursuant to an agreement by the non-Federal entity and the Federal
Government, then the costs incurred may be allowed to the extent specifically provided in such
agreement.
(d) If a proceeding referred to in paragraph (b) of this section is commenced by a state, local or foreign
government, the authorized Federal official may allow the costs incurred if such authorized official
determines that the costs were incurred as a result of:
(1) A specific term or condition of the Federal award, or
(2) Specific written direction of an authorized official of the Federal awarding agency.
(e) Costs incurred in connection with proceedings described in paragraph (b) of this section, which are not
made unallowable by that subsection, may be allowed but only to the extent that:
(1) The costs are reasonable and necessary in relation to the administration of the Federal award and
activities required to deal with the proceeding and the underlying cause of action;
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(2) Payment of the reasonable, necessary, allocable and otherwise allowable costs incurred is not
prohibited by any other provision(s) of the Federal award;
(3) The costs are not recovered from the Federal Government or a third party, either directly as a result
of the proceeding or otherwise; and,
(4) An authorized Federal official must determine the percentage of costs allowed considering the
complexity of litigation, generally accepted principles governing the award of legal fees in civil
actions involving the United States, and such other factors as may be appropriate. Such percentage
must not exceed 80 percent. However, if an agreement reached under paragraph (c) of this section
has explicitly considered this 80 percent limitation and permitted a higher percentage, then the full
amount of costs resulting from that agreement are allowable.
(f) Costs incurred by the non-Federal entity in connection with the defense of suits brought by its employees
or ex-employees under section 2 of the Major Fraud Act of 1988 (18 U.S.C. 1031), including the cost of all
relief necessary to make such employee whole, where the non-Federal entity was found liable or settled,
are unallowable.
(g) Costs of prosecution of claims against the Federal Government, including appeals of final Federal agency
decisions, are unallowable.
(h) Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent
infringement litigation, are unallowable unless otherwise provided for in the Federal award.
(i)

Costs which may be unallowable under this section, including directly associated costs, must be
segregated and accounted for separately. During the pendency of any proceeding covered by paragraphs
(b) and (f) of this section, the Federal Government must generally withhold payment of such costs.
However, if in its best interests, the Federal Government may provide for conditional payment upon
provision of adequate security, or other adequate assurance, and agreement to repay all unallowable
costs, plus interest, if the costs are subsequently determined to be unallowable.

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014]

§ 200.436 Depreciation.
(a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use.
The non-Federal entity may be compensated for the use of its buildings, capital improvements,
equipment, and software projects capitalized in accordance with GAAP, provided that they are used,
needed in the non-Federal entity's activities, and properly allocated to Federal awards. Such compensation
must be made by computing depreciation.
(b) The allocation for depreciation must be made in accordance with Appendices III through IX.
(c) Depreciation is computed applying the following rules. The computation of depreciation must be based on
the acquisition cost of the assets involved. For an asset donated to the non-Federal entity by a third party,
its fair market value at the time of the donation must be considered as the acquisition cost. Such assets
may be depreciated or claimed as matching but not both. For the computation of depreciation, the
acquisition cost will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government,
irrespective of where title was originally vested or where it is presently located;
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(3) Any portion of the cost of buildings and equipment contributed by or for the non-Federal entity that
are already claimed as matching or where law or agreement prohibits recovery;
(4) Any asset acquired solely for the performance of a non-Federal award; and
(d) When computing depreciation charges, the following must be observed:
(1) The period of useful service or useful life established in each case for usable capital assets must
take into consideration such factors as type of construction, nature of the equipment, technological
developments in the particular area, historical data, and the renewal and replacement policies
followed for the individual items or classes of assets involved.
(2) The depreciation method used to charge the cost of an asset (or group of assets) to accounting
periods must reflect the pattern of consumption of the asset during its useful life. In the absence of
clear evidence indicating that the expected consumption of the asset will be significantly greater in
the early portions than in the later portions of its useful life, the straight-line method must be
presumed to be the appropriate method. Depreciation methods once used may not be changed
unless approved in advance by the cognizant agency. The depreciation methods used to calculate
the depreciation amounts for indirect (F&A) rate purposes must be the same methods used by the
non-Federal entity for its financial statements.
(3) The entire building, including the shell and all components, may be treated as a single asset and
depreciated over a single useful life. A building may also be divided into multiple components. Each
component item may then be depreciated over its estimated useful life. The building components
must be grouped into three general components of a building: building shell (including construction
and design costs), building services systems (e.g., elevators, HVAC, plumbing system and heating
and air-conditioning system) and fixed equipment (e.g., sterilizers, casework, fume hoods, cold
rooms and glassware/washers). In exceptional cases, a cognizant agency may authorize a nonFederal entity to use more than these three groupings. When a non-Federal entity elects to
depreciate its buildings by its components, the same depreciation methods must be used for indirect
(F&A) purposes and financial statements purposes, as described in paragraphs (d)(1) and (2) of this
section.
(4) No depreciation may be allowed on any assets that have outlived their depreciable lives.
(5) Where the depreciation method is introduced to replace the use allowance method, depreciation
must be computed as if the asset had been depreciated over its entire life (i.e., from the date the
asset was acquired and ready for use to the date of disposal or withdrawal from service). The total
amount of use allowance and depreciation for an asset (including imputed depreciation applicable
to periods prior to the conversion from the use allowance method as well as depreciation after the
conversion) may not exceed the total acquisition cost of the asset.
(e) Charges for depreciation must be supported by adequate property records, and physical inventories must
be taken at least once every two years to ensure that the assets exist and are usable, used, and needed.
Statistical sampling techniques may be used in taking these inventories. In addition, adequate
depreciation records showing the amount of depreciation must be maintained.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

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§ 200.437 Employee health and welfare costs.
(a) Costs incurred in accordance with the non-Federal entity's documented policies for the improvement of
working conditions, employer-employee relations, employee health, and employee performance are
allowable.
(b) Such costs will be equitably apportioned to all activities of the non-Federal entity. Income generated from
any of these activities will be credited to the cost thereof unless such income has been irrevocably sent to
employee welfare organizations.
(c) Losses resulting from operating food services are allowable only if the non-Federal entity's objective is to
operate such services on a break-even basis. Losses sustained because of operating objectives other
than the above are allowable only:
(1) Where the non-Federal entity can demonstrate unusual circumstances; and
(2) With the approval of the cognizant agency for indirect costs.

§ 200.438 Entertainment costs.
Costs of entertainment, including amusement, diversion, and social activities and any associated costs are
unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic
purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the
Federal awarding agency.

§ 200.439 Equipment and other capital expenditures.
(a) See § 200.1 for the definitions of capital expenditures, equipment, special purpose equipment, general
purpose equipment, acquisition cost, and capital assets.
(b) The following rules of allowability must apply to equipment and other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct
charges, except with the prior written approval of the Federal awarding agency or pass-through
entity.
(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that
items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding
agency or pass-through entity.
(3) Capital expenditures for improvements to land, buildings, or equipment which materially increase
their value or useful life are unallowable as a direct cost except with the prior written approval of the
Federal awarding agency, or pass-through entity. See § 200.436, for rules on the allowability of
depreciation on buildings, capital improvements, and equipment. See also § 200.465.
(4) When approved as a direct charge pursuant to paragraphs (b)(1) through (3) of this section, capital
expenditures will be charged in the period in which the expenditure is incurred, or as otherwise
determined appropriate and negotiated with the Federal awarding agency.
(5) The unamortized portion of any equipment written off as a result of a change in capitalization levels
may be recovered by continuing to claim the otherwise allowable depreciation on the equipment, or
by amortizing the amount to be written off over a period of years negotiated with the Federal
cognizant agency for indirect cost.
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(6) Cost of equipment disposal. If the non-Federal entity is instructed by the Federal awarding agency to
otherwise dispose of or transfer the equipment the costs of such disposal or transfer are allowable.
(7) Equipment and other capital expenditures are unallowable as indirect costs. See § 200.436.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.440 Exchange rates.
(a) Cost increases for fluctuations in exchange rates are allowable costs subject to the availability of funding.
Prior approval of exchange rate fluctuations is required only when the change results in the need for
additional Federal funding, or the increased costs result in the need to significantly reduce the scope of
the project. The Federal awarding agency must however ensure that adequate funds are available to cover
currency fluctuations in order to avoid a violation of the Anti-Deficiency Act.
(b) The non-Federal entity is required to make reviews of local currency gains to determine the need for
additional federal funding before the expiration date of the Federal award. Subsequent adjustments for
currency increases may be allowable only when the non-Federal entity provides the Federal awarding
agency with adequate source documentation from a commonly used source in effect at the time the
expense was made, and to the extent that sufficient Federal funds are available.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014]

§ 200.441 Fines, penalties, damages and other settlements.
Costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state,
tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with
specific provisions of the Federal award, or with prior written approval of the Federal awarding agency. See also §
200.435.
[85 FR 49568, Aug. 13, 2020]

§ 200.442 Fund raising and investment management costs.
(a) Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and
bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. Fund
raising costs for the purposes of meeting the Federal program objectives are allowable with prior written
approval from the Federal awarding agency. Proposal costs are covered in § 200.460.
(b) Costs of investment counsel and staff and similar expenses incurred to enhance income from
investments are unallowable except when associated with investments covering pension, self-insurance,
or other funds which include Federal participation allowed by this part.
(c) Costs related to the physical custody and control of monies and securities are allowable.
(d) Both allowable and unallowable fund-raising and investment activities must be allocated as an
appropriate share of indirect costs under the conditions described in § 200.413.
[85 FR 49568, Aug. 13, 2020]

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§ 200.443 Gains and losses on disposition of depreciable assets.
(a) Gains and losses on the sale, retirement, or other disposition of depreciable property must be included in
the year in which they occur as credits or charges to the asset cost grouping(s) in which the property was
included. The amount of the gain or loss to be included as a credit or charge to the appropriate asset cost
grouping(s) is the difference between the amount realized on the property and the undepreciated basis of
the property.
(b) Gains and losses from the disposition of depreciable property must not be recognized as a separate credit
or charge under the following conditions:
(1) The gain or loss is processed through a depreciation account and is reflected in the depreciation
allowable under §§ 200.436 and 200.439.
(2) The property is given in exchange as part of the purchase price of a similar item and the gain or loss
is taken into account in determining the depreciation cost basis of the new item.
(3) A loss results from the failure to maintain permissible insurance, except as otherwise provided in §
200.447.
(4) Compensation for the use of the property was provided through use allowances in lieu of
depreciation.
(5) Gains and losses arising from mass or extraordinary sales, retirements, or other dispositions must
be considered on a case-by-case basis.
(c) Gains or losses of any nature arising from the sale or exchange of property other than the property
covered in paragraph (a) of this section, e.g., land, must be excluded in computing Federal award costs.
(d) When assets acquired with Federal funds, in part or wholly, are disposed of, the distribution of the
proceeds must be made in accordance with §§ 200.310 through 200.316 of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.444 General costs of government.
(a) For states, local governments, and Indian Tribes, the general costs of government are unallowable (except
as provided in § 200.475). Unallowable costs include:
(1) Salaries and expenses of the Office of the Governor of a state or the chief executive of a local
government or the chief executive of an Indian tribe;
(2) Salaries and other expenses of a state legislature, tribal council, or similar local governmental body,
such as a county supervisor, city council, school board, etc., whether incurred for purposes of
legislation or executive direction;
(3) Costs of the judicial branch of a government;
(4) Costs of prosecutorial activities unless treated as a direct cost to a specific program if authorized by
statute or regulation (however, this does not preclude the allowability of other legal activities of the
Attorney General as described in § 200.435); and
(5) Costs of other general types of government services normally provided to the general public, such as
fire and police, unless provided for as a direct cost under a program statute or regulation.
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(b) For Indian tribes and Councils of Governments (COGs) (see definition for Local government in § 200.1 of
this part), up to 50% of salaries and expenses directly attributable to managing and operating Federal
programs by the chief executive and his or her staff can be included in the indirect cost calculation
without documentation.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, 2020]

§ 200.445 Goods or services for personal use.
(a) Costs of goods or services for personal use of the non-Federal entity's employees are unallowable
regardless of whether the cost is reported as taxable income to the employees.
(b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and
personal living expenses are only allowable as direct costs regardless of whether reported as taxable
income to the employees. In addition, to be allowable direct costs must be approved in advance by a
Federal awarding agency.

§ 200.446 Idle facilities and idle capacity.
(a) As used in this section the following terms have the meanings set forth in this section:
(1) Facilities means land and buildings or any portion thereof, equipment individually or collectively, or
any other tangible capital asset, wherever located, and whether owned or leased by the non-Federal
entity.
(2) Idle facilities means completely unused facilities that are excess to the non-Federal entity's current
needs.
(3) Idle capacity means the unused capacity of partially used facilities. It is the difference between:
(i)

That which a facility could achieve under 100 percent operating time on a one-shift basis less
operating interruptions resulting from time lost for repairs, setups, unsatisfactory materials, and
other normal delays and;

(ii) The extent to which the facility was actually used to meet demands during the accounting
period. A multi-shift basis should be used if it can be shown that this amount of usage would
normally be expected for the type of facility involved.
(4) Cost of idle facilities or idle capacity means costs such as maintenance, repair, housing, rent, and
other related costs, e.g., insurance, interest, and depreciation. These costs could include the costs of
idle public safety emergency facilities, telecommunications, or information technology system
capacity that is built to withstand major fluctuations in load, e.g., consolidated data centers.
(b) The costs of idle facilities are unallowable except to the extent that:
(1) They are necessary to meet workload requirements which may fluctuate and are allocated
appropriately to all benefiting programs; or
(2) Although not necessary to meet fluctuations in workload, they were necessary when acquired and
are now idle because of changes in program requirements, efforts to achieve more economical
operations, reorganization, termination, or other causes which could not have been reasonably
foreseen. Under the exception stated in this subsection, costs of idle facilities are allowable for a
reasonable period of time, ordinarily not to exceed one year, depending on the initiative taken to use,
lease, or dispose of such facilities.
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(c) The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations
of usage or indirect cost rates from period to period. Such costs are allowable, provided that the capacity
is reasonably anticipated to be necessary to carry out the purpose of the Federal award or was originally
reasonable and is not subject to reduction or elimination by use on other Federal awards, subletting,
renting, or sale, in accordance with sound business, economic, or security practices. Widespread idle
capacity throughout an entire facility or among a group of assets having substantially the same function
may be considered idle facilities.

§ 200.447 Insurance and indemnification.
(a) Costs of insurance required or approved and maintained, pursuant to the Federal award, are allowable.
(b) Costs of other insurance in connection with the general conduct of activities are allowable subject to the
following limitations:
(1) Types and extent and cost of coverage are in accordance with the non-Federal entity's policy and
sound business practice.
(2) Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to,
Federal Government property are unallowable except to the extent that the Federal awarding agency
has specifically required or approved such costs.
(3) Costs allowed for business interruption or other similar insurance must exclude coverage of
management fees.
(4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar
responsibilities are allowable only to the extent that the insurance represents additional
compensation (see § 200.431). The cost of such insurance when the non-Federal entity is identified
as the beneficiary is unallowable.
(5) Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in
the non-Federal entity's materials or workmanship are unallowable.
(6) Medical liability (malpractice) insurance. Medical liability insurance is an allowable cost of Federal
research programs only to the extent that the Federal research programs involve human subjects or
training of participants in research techniques. Medical liability insurance costs must be treated as a
direct cost and must be assigned to individual projects based on the manner in which the insurer
allocates the risk to the population covered by the insurance.
(c) Actual losses which could have been covered by permissible insurance (through a self-insurance program
or otherwise) are unallowable, unless expressly provided for in the Federal award. However, costs incurred
because of losses not covered under nominal deductible insurance coverage provided in keeping with
sound management practice, and minor losses not covered by insurance, such as spoilage, breakage, and
disappearance of small hand tools, which occur in the ordinary course of operations, are allowable.
(d) Contributions to a reserve for certain self-insurance programs including workers' compensation,
unemployment compensation, and severance pay are allowable subject to the following provisions:
(1) The type of coverage and the extent of coverage and the rates and premiums would have been
allowed had insurance (including reinsurance) been purchased to cover the risks. However, provision
for known or reasonably estimated self-insured liabilities, which do not become payable for more
than one year after the provision is made, must not exceed the discounted present value of the

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liability. The rate used for discounting the liability must be determined by giving consideration to
such factors as the non-Federal entity's settlement rate for those liabilities and its investment rate of
return.
(2) Earnings or investment income on reserves must be credited to those reserves.
(3)
(i)

Contributions to reserves must be based on sound actuarial principles using historical
experience and reasonable assumptions. Reserve levels must be analyzed and updated at least
biennially for each major risk being insured and take into account any reinsurance, coinsurance,
etc. Reserve levels related to employee-related coverages will normally be limited to the value
of claims:
(A) Submitted and adjudicated but not paid;
(B) Submitted but not adjudicated; and
(C) Incurred but not submitted.

(ii) Reserve levels in excess of the amounts based on the above must be identified and justified in
the cost allocation plan or indirect cost rate proposal.
(4) Accounting records, actuarial studies, and cost allocations (or billings) must recognize any
significant differences due to types of insured risk and losses generated by the various insured
activities or agencies of the non-Federal entity. If individual departments or agencies of the nonFederal entity experience significantly different levels of claims for a particular risk, those
differences are to be recognized by the use of separate allocations or other techniques resulting in
an equitable allocation.
(5) Whenever funds are transferred from a self-insurance reserve to other accounts (e.g., general fund or
unrestricted account), refunds must be made to the Federal Government for its share of funds
transferred, including earned or imputed interest from the date of transfer and debt interest, if
applicable, chargeable in accordance with applicable Federal cognizant agency for indirect cost,
claims collection regulations.
(e) Insurance refunds must be credited against insurance costs in the year the refund is received.
(f) Indemnification includes securing the non-Federal entity against liabilities to third persons and other
losses not compensated by insurance or otherwise. The Federal Government is obligated to indemnify the
non-Federal entity only to the extent expressly provided for in the Federal award, except as provided in
paragraph (c) of this section.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49568, Aug. 13, 2020]

§ 200.448 Intellectual property.
(a) Patent costs.
(1) The following costs related to securing patents and copyrights are allowable:
(i)

Costs of preparing disclosures, reports, and other documents required by the Federal award,
and of searching the art to the extent necessary to make such disclosures;

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(ii) Costs of preparing documents and any other patent costs in connection with the filing and
prosecution of a United States patent application where title or royalty-free license is required
by the Federal Government to be conveyed to the Federal Government; and
(iii) General counseling services relating to patent and copyright matters, such as advice on patent
and copyright laws, regulations, clauses, and employee intellectual property agreements (See
also § 200.459).
(2) The following costs related to securing patents and copyrights are unallowable:
(i)

Costs of preparing disclosures, reports, and other documents, and of searching the art to make
disclosures not required by the Federal award;

(ii) Costs in connection with filing and prosecuting any foreign patent application, or any United
States patent application, where the Federal award does not require conveying title or a royaltyfree license to the Federal Government.
(b) Royalties and other costs for use of patents and copyrights.
(1) Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a copyright,
patent, or rights thereto, necessary for the proper performance of the Federal award are allowable
unless:
(i)

The Federal Government already has a license or the right to free use of the patent or copyright.

(ii) The patent or copyright has been adjudicated to be invalid, or has been administratively
determined to be invalid.
(iii) The patent or copyright is considered to be unenforceable.
(iv) The patent or copyright is expired.
(2) Special care should be exercised in determining reasonableness where the royalties may have been
arrived at as a result of less-than-arm's-length bargaining, such as:
(i)

Royalties paid to persons, including corporations, affiliated with the non-Federal entity.

(ii) Royalties paid to unaffiliated parties, including corporations, under an agreement entered into in
contemplation that a Federal award would be made.
(iii) Royalties paid under an agreement entered into after a Federal award is made to a non-Federal
entity.
(3) In any case involving a patent or copyright formerly owned by the non-Federal entity, the amount of
royalty allowed must not exceed the cost which would have been allowed had the non-Federal entity
retained title thereto.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020]

§ 200.449 Interest.
(a) General. Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of
the non-Federal entity's own funds, however represented, are unallowable. Financing costs (including
interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this
section.
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2 CFR 200.449(b)

(b) Capital assets.
(1) Capital assets is defined as noted in § 200.1 of this part. An asset cost includes (as applicable)
acquisition costs, construction costs, and other costs capitalized in accordance with GAAP.
(2) For non-Federal entity fiscal years beginning on or after January 1, 2016, intangible assets include
patents and computer software. For software development projects, only interest attributable to the
portion of the project costs capitalized in accordance with GAAP is allowable.
(c) Conditions for all non-Federal entities.
(1) The non-Federal entity uses the capital assets in support of Federal awards;
(2) The allowable asset costs to acquire facilities and equipment are limited to a fair market value
available to the non-Federal entity from an unrelated (arm's length) third party.
(3) The non-Federal entity obtains the financing via an arm's-length transaction (that is, a transaction
with an unrelated third party); or claims reimbursement of actual interest cost at a rate available via
such a transaction.
(4) The non-Federal entity limits claims for Federal reimbursement of interest costs to the least
expensive alternative. For example, a lease contract that transfers ownership by the end of the
contract may be determined less costly than purchasing through other types of debt financing, in
which case reimbursement must be limited to the amount of interest determined if leasing had been
used.
(5) The non-Federal entity expenses or capitalizes allowable interest cost in accordance with GAAP.
(6) Earnings generated by the investment of borrowed funds pending their disbursement for the asset
costs are used to offset the current period's allowable interest cost, whether that cost is expensed or
capitalized. Earnings subject to being reported to the Federal Internal Revenue Service under
arbitrage requirements are excludable.
(7) The following conditions must apply to debt arrangements over $1 million to purchase or construct
facilities, unless the non-Federal entity makes an initial equity contribution to the purchase of 25
percent or more. For this purpose, “initial equity contribution” means the amount or value of
contributions made by the non-Federal entity for the acquisition of facilities prior to occupancy.
(i)

The non-Federal entity must reduce claims for reimbursement of interest cost by an amount
equal to imputed interest earnings on excess cash flow attributable to the portion of the facility
used for Federal awards.

(ii) The non-Federal entity must impute interest on excess cash flow as follows:
(A) Annually, the non-Federal entity must prepare a cumulative (from the inception of the
project) report of monthly cash inflows and outflows, regardless of the funding source. For
this purpose, inflows consist of Federal reimbursement for depreciation, amortization of
capitalized construction interest, and annual interest cost. Outflows consist of initial
equity contributions, debt principal payments (less the pro-rata share attributable to the
cost of land), and interest payments.
(B) To compute monthly cash inflows and outflows, the non-Federal entity must divide the
annual amounts determined in step (i) by the number of months in the year (usually 12)
that the building is in service.
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2 CFR 200.449(c)(7)(ii)(C)

(C) For any month in which cumulative cash inflows exceed cumulative outflows, interest
must be calculated on the excess inflows for that month and be treated as a reduction to
allowable interest cost. The rate of interest to be used must be the three-month Treasury
bill closing rate as of the last business day of that month.
(8) Interest attributable to a fully depreciated asset is unallowable.
(d) Additional conditions for states, local governments and Indian tribes. For costs to be allowable, the nonFederal entity must have incurred the interest costs for buildings after October 1, 1980, or for land and
equipment after September 1, 1995.
(1) The requirement to offset interest earned on borrowed funds against current allowable interest cost
(paragraph (c)(5), above) also applies to earnings on debt service reserve funds.
(2) The non-Federal entity will negotiate the amount of allowable interest cost related to the acquisition
of facilities with asset costs of $1 million or more, as outlined in paragraph (c)(7) of this section. For
this purpose, a non-Federal entity must consider only cash inflows and outflows attributable to that
portion of the real property used for Federal awards.
(e) Additional conditions for IHEs. For costs to be allowable, the IHE must have incurred the interest costs
after July 1, 1982, in connection with acquisitions of capital assets that occurred after that date.
(f) Additional condition for nonprofit organizations. For costs to be allowable, the nonprofit organization
incurred the interest costs after September 29, 1995, in connection with acquisitions of capital assets that
occurred after that date.
(g) The interest allowability provisions of this section do not apply to a nonprofit organization subject to “full
coverage” under the Cost Accounting Standards (CAS), as defined at 48 CFR 9903.201–2(a). The nonFederal entity's Federal awards are instead subject to CAS 414 (48 CFR 9904.414), “Cost of Money as an
Element of the Cost of Facilities Capital”, and CAS 417 (48 CFR 9904.417), “Cost of Money as an Element
of the Cost of Capital Assets Under Construction”.
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13, 2020]

§ 200.450 Lobbying.
(a) The cost of certain influencing activities associated with obtaining grants, contracts, or cooperative
agreements, or loans is an unallowable cost. Lobbying with respect to certain grants, contracts,
cooperative agreements, and loans is governed by relevant statutes, including among others, the
provisions of 31 U.S.C. 1352, as well as the common rule, “New Restrictions on Lobbying” published on
February 26, 1990, including definitions, and the Office of Management and Budget “Governmentwide
Guidance for New Restrictions on Lobbying” and notices published on December 20, 1989, June 15, 1990,
January 15, 1992, and January 19, 1996.
(b) Executive lobbying costs. Costs incurred in attempting to improperly influence either directly or indirectly,
an employee or officer of the executive branch of the Federal Government to give consideration or to act
regarding a Federal award or a regulatory matter are unallowable. Improper influence means any influence
that induces or tends to induce a Federal employee or officer to give consideration or to act regarding a
Federal award or regulatory matter on any basis other than the merits of the matter.
(c) In addition to the above, the following restrictions are applicable to nonprofit organizations and IHEs:
(1) Costs associated with the following activities are unallowable:
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(i)

2 CFR 200.450(c)(1)(i)

Attempts to influence the outcomes of any Federal, state, or local election, referendum,
initiative, or similar procedure, through in-kind or cash contributions, endorsements, publicity, or
similar activity;

(ii) Establishing, administering, contributing to, or paying the expenses of a political party,
campaign, political action committee, or other organization established for the purpose of
influencing the outcomes of elections in the United States;
(iii) Any attempt to influence:
(A) The introduction of Federal or state legislation;
(B) The enactment or modification of any pending Federal or state legislation through
communication with any member or employee of the Congress or state legislature
(including efforts to influence state or local officials to engage in similar lobbying activity);
(C) The enactment or modification of any pending Federal or state legislation by preparing,
distributing, or using publicity or propaganda, or by urging members of the general public,
or any segment thereof, to contribute to or participate in any mass demonstration, march,
rally, fund raising drive, lobbying campaign or letter writing or telephone campaign; or
(D) Any government official or employee in connection with a decision to sign or veto enrolled
legislation;
(iv) Legislative liaison activities, including attendance at legislative sessions or committee hearings,
gathering information regarding legislation, and analyzing the effect of legislation, when such
activities are carried on in support of or in knowing preparation for an effort to engage in
unallowable lobbying.
(2) The following activities are excepted from the coverage of paragraph (c)(1) of this section:
(i)

Technical and factual presentations on topics directly related to the performance of a grant,
contract, or other agreement (through hearing testimony, statements, or letters to the Congress
or a state legislature, or subdivision, member, or cognizant staff member thereof), in response
to a documented request (including a Congressional Record notice requesting testimony or
statements for the record at a regularly scheduled hearing) made by the non-Federal entity's
member of congress, legislative body or a subdivision, or a cognizant staff member thereof,
provided such information is readily obtainable and can be readily put in deliverable form, and
further provided that costs under this section for travel, lodging or meals are unallowable
unless incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a
written request for such presentation made by the Chairman or Ranking Minority Member of the
Committee or Subcommittee conducting such hearings;

(ii) Any lobbying made unallowable by paragraph (c)(1)(iii) of this section to influence state
legislation in order to directly reduce the cost, or to avoid material impairment of the nonFederal entity's authority to perform the grant, contract, or other agreement; or
(iii) Any activity specifically authorized by statute to be undertaken with funds from the Federal
award.

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2 CFR 200.450(c)(2)(iv)

(iv) Any activity excepted from the definitions of “lobbying” or “influencing legislation” by the
Internal Revenue Code provisions that require nonprofit organizations to limit their participation
in direct and “grass roots” lobbying activities in order to retain their charitable deduction status
and avoid punitive excise taxes, I.R.C. §§ 501(c)(3), 501(h), 4911(a), including:
(A) Nonpartisan analysis, study, or research reports;
(B) Examinations and discussions of broad social, economic, and similar problems; and
(C) Information provided upon request by a legislator for technical advice and assistance, as
defined by I.R.C. § 4911(d)(2) and 26 CFR 56.4911–2(c)(1)–(c)(3).
(v) When a non-Federal entity seeks reimbursement for indirect (F&A) costs, total lobbying costs
must be separately identified in the indirect (F&A) cost rate proposal, and thereafter treated as
other unallowable activity costs in accordance with the procedures of § 200.413.
(vi) The non-Federal entity must submit as part of its annual indirect (F&A) cost rate proposal a
certification that the requirements and standards of this section have been complied with. (See
also § 200.415.)
(vii)
(A) Time logs, calendars, or similar records are not required to be created for purposes of
complying with the record keeping requirements in § 200.302 with respect to lobbying
costs during any particular calendar month when:
(1) The employee engages in lobbying (as defined in paragraphs (c)(1) and (c)(2) of this
section) 25 percent or less of the employee's compensated hours of employment
during that calendar month; and
(2) Within the preceding five-year period, the non-Federal entity has not materially
misstated allowable or unallowable costs of any nature, including legislative lobbying
costs.
(B) When conditions in paragraph (c)(2)(vii)(A)(1) and (2) of this section are met, non-Federal
entities are not required to establish records to support the allowability of claimed costs in
addition to records already required or maintained. Also, when conditions in paragraphs
(c)(2)(vii)(A)(1) and (2) of this section are met, the absence of time logs, calendars, or
similar records will not serve as a basis for disallowing costs by contesting estimates of
lobbying time spent by employees during a calendar month.
(viii) The Federal awarding agency must establish procedures for resolving in advance, in
consultation with OMB, any significant questions or disagreements concerning the
interpretation or application of this section. Any such advance resolutions must be binding in
any subsequent settlements, audits, or investigations with respect to that grant or contract for
purposes of interpretation of this part, provided, however, that this must not be construed to
prevent a contractor or non-Federal entity from contesting the lawfulness of such a
determination.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

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2 CFR 200.451

§ 200.451 Losses on other awards or contracts.
Any excess of costs over income under any other award or contract of any nature is unallowable. This includes, but
is not limited to, the non-Federal entity's contributed portion by reason of cost-sharing agreements or any underrecoveries through negotiation of flat amounts for indirect (F&A) costs. Also, any excess of costs over authorized
funding levels transferred from any award or contract to another award or contract is unallowable. All losses are not
allowable indirect (F&A) costs and are required to be included in the appropriate indirect cost rate base for
allocation of indirect costs.

§ 200.452 Maintenance and repair costs.
Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of
buildings and equipment (including Federal property unless otherwise provided for) which neither add to the
permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating
condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and
equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These
costs are only allowable to the extent not paid through rental or other agreements.
[85 FR 49569, Aug. 13, 2020]

§ 200.453 Materials and supplies costs, including costs of computing devices.
(a) Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are
allowable.
(b) Purchased materials and supplies must be charged at their actual prices, net of applicable credits.
Withdrawals from general stores or stockrooms must be charged at their actual net cost under any
recognized method of pricing inventory withdrawals, consistently applied. Incoming transportation
charges are a proper part of materials and supplies costs.
(c) Materials and supplies used for the performance of a Federal award may be charged as direct costs. In
the specific case of computing devices, charging as direct costs is allowable for devices that are
essential and allocable, but not solely dedicated, to the performance of a Federal award.
(d) Where federally-donated or furnished materials are used in performing the Federal award, such materials
will be used without charge.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014]

§ 200.454 Memberships, subscriptions, and professional activity costs.
(a) Costs of the non-Federal entity's membership in business, technical, and professional organizations are
allowable.
(b) Costs of the non-Federal entity's subscriptions to business, professional, and technical periodicals are
allowable.
(c) Costs of membership in any civic or community organization are allowable with prior approval by the
Federal awarding agency or pass-through entity.
(d) Costs of membership in any country club or social or dining club or organization are unallowable.
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2 CFR 200.454(e)

(e) Costs of membership in organizations whose primary purpose is lobbying are unallowable. See also §
200.450.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.455 Organization costs.
Costs such as incorporation fees, brokers' fees, fees to promoters, organizers or management consultants,
attorneys, accountants, or investment counselor, whether or not employees of the non-Federal entity in connection
with establishment or reorganization of an organization, are unallowable except with prior approval of the Federal
awarding agency.

§ 200.456 Participant support costs.
Participant support costs as defined in § 200.1 are allowable with the prior approval of the Federal awarding
agency.
[85 FR 49569, Aug. 13, 2020]

§ 200.457 Plant and security costs.
Necessary and reasonable expenses incurred for protection and security of facilities, personnel, and work products
are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security
activities; equipment; barriers; protective (non-military) gear, devices, and equipment; contractual security services;
and consultants. Capital expenditures for plant security purposes are subject to § 200.439.
[85 FR 49569, Aug. 13, 2020]

§ 200.458 Pre-award costs.
Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to
the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely
performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable
if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. If
charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise
specified by the Federal awarding agency or pass-through entity.
[85 FR 49569, Aug. 13, 2020]

§ 200.459 Professional service costs.
(a) Costs of professional and consultant services rendered by persons who are members of a particular
profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are
allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services
rendered and when not contingent upon recovery of the costs from the Federal Government. In addition,
legal and related services are limited under § 200.435.
(b) In determining the allowability of costs in a particular case, no single factor or any special combination of
factors is necessarily determinative. However, the following factors are relevant:
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2 CFR 200.459(b)(1)

(1) The nature and scope of the service rendered in relation to the service required.
(2) The necessity of contracting for the service, considering the non-Federal entity's capability in the
particular area.
(3) The past pattern of such costs, particularly in the years prior to Federal awards.
(4) The impact of Federal awards on the non-Federal entity's business (i.e., what new problems have
arisen).
(5) Whether the proportion of Federal work to the non-Federal entity's total business is such as to
influence the non-Federal entity in favor of incurring the cost, particularly where the services
rendered are not of a continuing nature and have little relationship to work under Federal awards.
(6) Whether the service can be performed more economically by direct employment rather than
contracting.
(7) The qualifications of the individual or concern rendering the service and the customary fees charged,
especially on non-federally funded activities.
(8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of
time required, rate of compensation, and termination provisions).
(c) In addition to the factors in paragraph (b) of this section, to be allowable, retainer fees must be supported
by evidence of bona fide services available or rendered.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.460 Proposal costs.
Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-Federal
awards or projects, including the development of data necessary to support the non-Federal entity's bids or
proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and
proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the nonFederal entity. No proposal costs of past accounting periods will be allocable to the current period.

§ 200.461 Publication and printing costs.
(a) Publication costs for electronic and print media, including distribution, promotion, and general handling
are allowable. If these costs are not identifiable with a particular cost objective, they should be allocated
as indirect costs to all benefiting activities of the non-Federal entity.
(b) Page charges for professional journal publications are allowable where:
(1) The publications report work supported by the Federal Government; and
(2) The charges are levied impartially on all items published by the journal, whether or not under a
Federal award.
(3) The non-Federal entity may charge the Federal award during closeout for the costs of publication or
sharing of research results if the costs are not incurred during the period of performance of the
Federal award. If charged to the award, these costs must be charged to the final budget period of the
award, unless otherwise specified by the Federal awarding agency.

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2 CFR 200.462

[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.462 Rearrangement and reconversion costs.
(a) Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect
costs. Special arrangements and alterations costs incurred specifically for a Federal award are allowable
as a direct cost with the prior approval of the Federal awarding agency or pass-through entity.
(b) Costs incurred in the restoration or rehabilitation of the non-Federal entity's facilities to approximately the
same condition existing immediately prior to commencement of Federal awards, less costs related to
normal wear and tear, are allowable.

§ 200.463 Recruiting costs.
(a) Subject to paragraphs (b) and (c) of this section, and provided that the size of the staff recruited and
maintained is in keeping with workload requirements, costs of “help wanted” advertising, operating costs
of an employment office necessary to secure and maintain an adequate staff, costs of operating an
aptitude and educational testing program, travel costs of employees while engaged in recruiting
personnel, travel costs of applicants for interviews for prospective employment, and relocation costs
incurred incident to recruitment of new employees, are allowable to the extent that such costs are
incurred pursuant to the non-Federal entity's standard recruitment program. Where the non-Federal entity
uses employment agencies, costs not in excess of standard commercial rates for such services are
allowable.
(b) Special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel that
do not meet the test of reasonableness or do not conform with the established practices of the nonFederal entity, are unallowable.
(c) Where relocation costs incurred incident to recruitment of a new employee have been funded in whole or
in part to a Federal award, and the newly hired employee resigns for reasons within the employee's control
within 12 months after hire, the non-Federal entity will be required to refund or credit the Federal share of
such relocation costs to the Federal Government. See also § 200.464.
(d) Short-term, travel visa costs (as opposed to longer-term, immigration visas) are generally allowable
expenses that may be proposed as a direct cost. Since short-term visas are issued for a specific period
and purpose, they can be clearly identified as directly connected to work performed on a Federal award.
For these costs to be directly charged to a Federal award, they must:
(1) Be critical and necessary for the conduct of the project;
(2) Be allowable under the applicable cost principles;
(3) Be consistent with the non-Federal entity's cost accounting practices and non-Federal entity policy;
and
(4) Meet the definition of “direct cost” as described in the applicable cost principles.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49569, Aug. 13, 2020]

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2 CFR 200.464

§ 200.464 Relocation costs of employees.
(a) Relocation costs are costs incident to the permanent change of duty assignment (for an indefinite period
or for a stated period of not less than 12 months) of an existing employee or upon recruitment of a new
employee. Relocation costs are allowable, subject to the limitations described in paragraphs (b), (c), and
(d) of this section, provided that:
(1) The move is for the benefit of the employer.
(2) Reimbursement to the employee is in accordance with an established written policy consistently
followed by the employer.
(3) The reimbursement does not exceed the employee's actual (or reasonably estimated) expenses.
(b) Allowable relocation costs for current employees are limited to the following:
(1) The costs of transportation of the employee, members of his or her immediate family and his
household, and personal effects to the new location.
(2) The costs of finding a new home, such as advance trips by employees and spouses to locate living
quarters and temporary lodging during the transition period, up to maximum period of 30 calendar
days.
(3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the
employee's former home. These costs, together with those described in (4), are limited to 8 per cent
of the sales price of the employee's former home.
(4) The continuing costs of ownership (for up to six months) of the vacant former home after the
settlement or lease date of the employee's new permanent home, such as maintenance of buildings
and grounds (exclusive of fixing-up expenses), utilities, taxes, and property insurance.
(5) Other necessary and reasonable expenses normally incident to relocation, such as the costs of
canceling an unexpired lease, transportation of personal property, and purchasing insurance against
loss of or damages to personal property. The cost of canceling an unexpired lease is limited to three
times the monthly rental.
(c) Allowable relocation costs for new employees are limited to those described in paragraphs (b)(1) and (2)
of this section. When relocation costs incurred incident to the recruitment of new employees have been
charged to a Federal award and the employee resigns for reasons within the employee's control within 12
months after hire, the non-Federal entity must refund or credit the Federal Government for its share of the
cost. If dependents are not permitted at the location for any reason and the costs do not include costs of
transporting household goods, the costs of travel to an overseas location must be considered travel costs
in accordance with § 200.474 Travel costs, and not this relocations costs of employees (See also §
200.464).
(d) The following costs related to relocation are unallowable:
(1) Fees and other costs associated with acquiring a new home.
(2) A loss on the sale of a former home.
(3) Continuing mortgage principal and interest payments on a home being sold.
(4) Income taxes paid by an employee related to reimbursed relocation costs.

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2 CFR 200.465

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49570, Aug. 13, 2020]

§ 200.465 Rental costs of real property and equipment.
(a) Subject to the limitations described in paragraphs (b) through (d) of this section, rental costs are
allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable
property, if any; market conditions in the area; alternatives available; and the type, life expectancy,
condition, and value of the property leased. Rental arrangements should be reviewed periodically to
determine if circumstances have changed and other options are available.
(b) Rental costs under “sale and lease back” arrangements are allowable only up to the amount that would be
allowed had the non-Federal entity continued to own the property. This amount would include expenses
such as depreciation, maintenance, taxes, and insurance.
(c) Rental costs under “less-than-arm's-length” leases are allowable only up to the amount (as explained in
paragraph (b) of this section). For this purpose, a less-than-arm's-length lease is one under which one
party to the lease agreement is able to control or substantially influence the actions of the other. Such
leases include, but are not limited to those between:
(1) Divisions of the non-Federal entity;
(2) The non-Federal entity under common control through common officers, directors, or members; and
(3) The non-Federal entity and a director, trustee, officer, or key employee of the non-Federal entity or an
immediate family member, either directly or through corporations, trusts, or similar arrangements in
which they hold a controlling interest. For example, the non-Federal entity may establish a separate
corporation for the sole purpose of owning property and leasing it back to the non-Federal entity.
(4) Family members include one party with any of the following relationships to another party:
(i)

Spouse, and parents thereof;

(ii) Children, and spouses thereof;
(iii) Parents, and spouses thereof;
(iv) Siblings, and spouses thereof;
(v) Grandparents and grandchildren, and spouses thereof;
(vi) Domestic partner and parents thereof, including domestic partners of any individual in 2
through 5 of this definition; and
(vii) Any individual related by blood or affinity whose close association with the employee is the
equivalent of a family relationship.
(5) Rental costs under leases which are required to be treated as capital leases under GAAP are
allowable only up to the amount (as explained in paragraph (b) of this section) that would be allowed
had the non-Federal entity purchased the property on the date the lease agreement was executed.
The provisions of GAAP must be used to determine whether a lease is a capital lease. Interest costs
related to capital leases are allowable to the extent they meet the criteria in § 200.449 Interest.
Unallowable costs include amounts paid for profit, management fees, and taxes that would not have
been incurred had the non-Federal entity purchased the property.

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2 CFR 200.465(c)(6)

(6) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to
include commercial or residential real estate, for purposes such as the home office workspace is
unallowable.
(d) Rental costs under leases which are required to be accounted for as a financed purchase under GASB
standards or a finance lease under FASB standards under GAAP are allowable only up to the amount (as
explained in paragraph (b) of this section) that would be allowed had the non-Federal entity purchased the
property on the date the lease agreement was executed. Interest costs related to these leases are
allowable to the extent they meet the criteria in § 200.449. Unallowable costs include amounts paid for
profit, management fees, and taxes that would not have been incurred had the non-Federal entity
purchased the property.
(e) Rental or lease payments are allowable under lease contracts where the non-Federal entity is required to
recognize an intangible right-to-use lease asset (per GASB) or right of use operating lease asset (per
FASB) for purposes of financial reporting in accordance with GAAP.
(f) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to
include commercial or residential real estate, for purposes such as the home office workspace is
unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.466 Scholarships and student aid costs.
(a) Costs of scholarships, fellowships, and other programs of student aid at IHEs are allowable only when the
purpose of the Federal award is to provide training to selected participants and the charge is approved by
the Federal awarding agency. However, tuition remission and other forms of compensation paid as, or in
lieu of, wages to students performing necessary work are allowable provided that:
(1) The individual is conducting activities necessary to the Federal award;
(2) Tuition remission and other support are provided in accordance with established policy of the IHE
and consistently provided in a like manner to students in return for similar activities conducted under
Federal awards as well as other activities; and
(3) During the academic period, the student is enrolled in an advanced degree program at a non-Federal
entity or affiliated institution and the activities of the student in relation to the Federal award are
related to the degree program;
(4) The tuition or other payments are reasonable compensation for the work performed and are
conditioned explicitly upon the performance of necessary work; and
(5) It is the IHE's practice to similarly compensate students under Federal awards as well as other
activities.
(b) Charges for tuition remission and other forms of compensation paid to students as, or in lieu of, salaries
and wages must be subject to the reporting requirements in § 200.430, and must be treated as direct or
indirect cost in accordance with the actual work being performed. Tuition remission may be charged on
an average rate basis. See also § 200.431.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

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§ 200.467 Selling and marketing costs.
Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421)
are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the
performance of the Federal award.
[85 FR 49570, Aug. 13, 2020]

§ 200.468 Specialized service facilities.
(a) The costs of services provided by highly complex or specialized facilities operated by the non-Federal
entity, such as computing facilities, wind tunnels, and reactors are allowable, provided the charges for the
services meet the conditions of either paragraph (b) or (c) of this section, and, in addition, take into
account any items of income or Federal financing that qualify as applicable credits under § 200.406.
(b) The costs of such services, when material, must be charged directly to applicable awards based on actual
usage of the services on the basis of a schedule of rates or established methodology that:
(1) Does not discriminate between activities under Federal awards and other activities of the nonFederal entity, including usage by the non-Federal entity for internal purposes, and
(2) Is designed to recover only the aggregate costs of the services. The costs of each service must
consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates
must be adjusted at least biennially, and must take into consideration over/under-applied costs of
the previous period(s).
(c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs.
(d) Under some extraordinary circumstances, where it is in the best interest of the Federal Government and
the non-Federal entity to establish alternative costing arrangements, such arrangements may be worked
out with the Federal cognizant agency for indirect costs.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49569, Aug. 13, 2020]

§ 200.469 Student activity costs.
Costs incurred for intramural activities, student publications, student clubs, and other student activities, are
unallowable, unless specifically provided for in the Federal award.

§ 200.470 Taxes (including Value Added Tax).
(a) For states, local governments and Indian tribes:
(1) Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes
that disproportionately affect Federal programs or changes in tax policies that disproportionately
affect Federal programs.
(2) Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided
to the Federal Government are allowable.

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(3) This provision does not restrict the authority of the Federal awarding agency to identify taxes where
Federal participation is inappropriate. Where the identification of the amount of unallowable taxes
would require an inordinate amount of effort, the cognizant agency for indirect costs may accept a
reasonable approximation thereof.
(b) For nonprofit organizations and IHEs:
(1) In general, taxes which the non-Federal entity is required to pay and which are paid or accrued in
accordance with GAAP, and payments made to local governments in lieu of taxes which are
commensurate with the local government services received are allowable, except for:
(i)

Taxes from which exemptions are available to the non-Federal entity directly or which are
available to the non-Federal entity based on an exemption afforded the Federal Government
and, in the latter case, when the Federal awarding agency makes available the necessary
exemption certificates,

(ii) Special assessments on land which represent capital improvements, and
(iii) Federal income taxes.
(2) Any refund of taxes, and any payment to the non-Federal entity of interest thereon, which were
allowed as Federal award costs, will be credited either as a cost reduction or cash refund, as
appropriate, to the Federal Government. However, any interest actually paid or credited to an nonFederal entity incident to a refund of tax, interest, and penalty will be paid or credited to the Federal
Government only to the extent that such interest accrued over the period during which the nonFederal entity has been reimbursed by the Federal Government for the taxes, interest, and penalties.
(c) Value Added Tax (VAT) Foreign taxes charged for the purchase of goods or services that a non-Federal
entity is legally required to pay in country is an allowable expense under Federal awards. Foreign tax
refunds or applicable credits under Federal awards refer to receipts, or reduction of expenditures, which
operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs.
To the extent that such credits accrued or received by the non-Federal entity relate to allowable cost,
these costs must be credited to the Federal awarding agency either as costs or cash refunds. If the costs
are credited back to the Federal award, the non-Federal entity may reduce the Federal share of costs by
the amount of the foreign tax reimbursement, or where Federal award has not expired, use the foreign
government tax refund for approved activities under the Federal award with prior approval of the Federal
awarding agency.

§ 200.471 Telecommunication costs and video surveillance costs.
(a) Costs incurred for telecommunications and video surveillance services or equipment such as phones,
internet, video surveillance, cloud servers are allowable except for the following circumstances:
(b) Obligating or expending covered telecommunications and video surveillance services or equipment or
services as described in § 200.216 to:
(1) Procure or obtain, extend or renew a contract to procure or obtain;
(2) Enter into a contract (or extend or renew a contract) to procure; or
(3) Obtain the equipment, services, or systems.
[85 FR 49570, Aug. 13, 2020]

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§ 200.472 Termination costs.
Termination of a Federal award generally gives rise to the incurrence of costs, or the need for special treatment of
costs, which would not have arisen had the Federal award not been terminated. Cost principles covering these
items are set forth in this section. They are to be used in conjunction with the other provisions of this part in
termination situations.
(a) The cost of items reasonably usable on the non-Federal entity's other work must not be allowable unless
the non-Federal entity submits evidence that it would not retain such items at cost without sustaining a
loss. In deciding whether such items are reasonably usable on other work of the non-Federal entity, the
Federal awarding agency should consider the non-Federal entity's plans and orders for current and
scheduled activity. Contemporaneous purchases of common items by the non-Federal entity must be
regarded as evidence that such items are reasonably usable on the non-Federal entity's other work. Any
acceptance of common items as allocable to the terminated portion of the Federal award must be limited
to the extent that the quantities of such items on hand, in transit, and on order are in excess of the
reasonable quantitative requirements of other work.
(b) If in a particular case, despite all reasonable efforts by the non-Federal entity, certain costs cannot be
discontinued immediately after the effective date of termination, such costs are generally allowable within
the limitations set forth in this part, except that any such costs continuing after termination due to the
negligent or willful failure of the non-Federal entity to discontinue such costs must be unallowable.
(c) Loss of useful value of special tooling, machinery, and equipment is generally allowable if:
(1) Such special tooling, special machinery, or equipment is not reasonably capable of use in the other
work of the non-Federal entity,
(2) The interest of the Federal Government is protected by transfer of title or by other means deemed
appropriate by the Federal awarding agency (see also § 200.313 (d)), and
(3) The loss of useful value for any one terminated Federal award is limited to that portion of the
acquisition cost which bears the same ratio to the total acquisition cost as the terminated portion of
the Federal award bears to the entire terminated Federal award and other Federal awards for which
the special tooling, machinery, or equipment was acquired.
(d) Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably
necessary for the performance of the terminated Federal award less the residual value of such leases, if:
(1) The amount of such rental claimed does not exceed the reasonable use value of the property leased
for the period of the Federal award and such further period as may be reasonable, and
(2) The non-Federal entity makes all reasonable efforts to terminate, assign, settle, or otherwise reduce
the cost of such lease. There also may be included the cost of alterations of such leased property,
provided such alterations were necessary for the performance of the Federal award, and of
reasonable restoration required by the provisions of the lease.
(e) Settlement expenses including the following are generally allowable:
(1) Accounting, legal, clerical, and similar costs reasonably necessary for:
(i)

The preparation and presentation to the Federal awarding agency of settlement claims and
supporting data with respect to the terminated portion of the Federal award, unless the
termination is for cause (see subpart D, including §§ 200.339–200.343); and

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(ii) The termination and settlement of subawards.
(2) Reasonable costs for the storage, transportation, protection, and disposition of property provided by
the Federal Government or acquired or produced for the Federal award.
(f) Claims under subawards, including the allocable portion of claims which are common to the Federal
award and to other work of the non-Federal entity, are generally allowable. An appropriate share of the
non-Federal entity's indirect costs may be allocated to the amount of settlements with contractors and/or
subrecipients, provided that the amount allocated is otherwise consistent with the basic guidelines
contained in § 200.414. The indirect costs so allocated must exclude the same and similar costs claimed
directly or indirectly as settlement expenses.
[78 FR 78608, Dec. 26, 2013. Redesignated and amended at 85 FR 49570, Aug. 13, 2020]

§ 200.473 Training and education costs.
The cost of training and education provided for employee development is allowable.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020]

§ 200.474 Transportation costs.
Costs incurred for freight, express, cartage, postage, and other transportation services relating either to goods
purchased, in process, or delivered, are allowable. When such costs can readily be identified with the items involved,
they may be charged directly as transportation costs or added to the cost of such items. Where identification with
the materials received cannot readily be made, inbound transportation cost may be charged to the appropriate
indirect (F&A) cost accounts if the non-Federal entity follows a consistent, equitable procedure in this respect.
Outbound freight, if reimbursable under the terms and conditions of the Federal award, should be treated as a direct
cost.
[78 FR 78608, Dec. 26, 2013. Redesignated at 85 FR 49570, Aug. 13, 2020]

§ 200.475 Travel costs.
(a) General. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred
by employees who are in travel status on official business of the non-Federal entity. Such costs may be
charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a
combination of the two, provided the method used is applied to an entire trip and not to selected days of
the trip, and results in charges consistent with those normally allowed in like circumstances in the nonFederal entity's non-federally-funded activities and in accordance with non-Federal entity's written travel
reimbursement policies. Notwithstanding the provisions of § 200.444, travel costs of officials covered by
that section are allowable with the prior written approval of the Federal awarding agency or pass-through
entity when they are specifically related to the Federal award.
(b) Lodging and subsistence. Costs incurred by employees and officers for travel, including costs of lodging,
other subsistence, and incidental expenses, must be considered reasonable and otherwise allowable only
to the extent such costs do not exceed charges normally allowed by the non-Federal entity in its regular
operations as the result of the non-Federal entity's written travel policy. In addition, if these costs are
charged directly to the Federal award documentation must justify that:
(1) Participation of the individual is necessary to the Federal award; and
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(2) The costs are reasonable and consistent with non-Federal entity's established travel policy.
(c)
(1) Temporary dependent care costs (as dependent is defined in 26 U.S.C. 152) above and beyond
regular dependent care that directly results from travel to conferences is allowable provided that:
(i)

The costs are a direct result of the individual's travel for the Federal award;

(ii) The costs are consistent with the non-Federal entity's documented travel policy for all entity
travel; and
(iii) Are only temporary during the travel period.
(2) Travel costs for dependents are unallowable, except for travel of duration of six months or more with
prior approval of the Federal awarding agency. See also § 200.432.
(d) In the absence of an acceptable, written non-Federal entity policy regarding travel costs, the rates and
amounts established under 5 U.S.C. 5701–11, (“Travel and Subsistence Expenses; Mileage Allowances”),
or by the Administrator of General Services, or by the President (or his or her designee) pursuant to any
provisions of such subchapter must apply to travel under Federal awards (48 CFR 31.205–46(a)).
(e) Commercial air travel.
(1) Airfare costs in excess of the basic least expensive unrestricted accommodations class offered by
commercial airlines are unallowable except when such accommodations would:
(i)

Require circuitous routing;

(ii) Require travel during unreasonable hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that would offset the transportation savings; or
(v) Offer accommodations not reasonably adequate for the traveler's medical needs. The nonFederal entity must justify and document these conditions on a case-by-case basis in order for
the use of first-class or business-class airfare to be allowable in such cases.
(2) Unless a pattern of avoidance is detected, the Federal Government will generally not question a nonFederal entity's determinations that customary standard airfare or other discount airfare is
unavailable for specific trips if the non-Federal entity can demonstrate that such airfare was not
available in the specific case.
(f) Air travel by other than commercial carrier. Costs of travel by non-Federal entity-owned, -leased, or
-chartered aircraft include the cost of lease, charter, operation (including personnel costs), maintenance,
depreciation, insurance, and other related costs. The portion of such costs that exceeds the cost of
airfare as provided for in paragraph (d) of this section, is unallowable.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014. Redesignated and amended at 85 FR 49570, Aug. 13,
2020]

§ 200.476 Trustees.
Travel and subsistence costs of trustees (or directors) at IHEs and nonprofit organizations are allowable. See also §
200.475.
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[85 FR 49571, Aug. 13, 2020]

Subpart F—Audit Requirements
GENERAL
§ 200.500 Purpose.
This part sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of
non-Federal entities expending Federal awards.

AUDITS
§ 200.501 Audit requirements.
(a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal
year in Federal awards must have a single or program-specific audit conducted for that year in
accordance with the provisions of this part.
(b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity's fiscal year
in Federal awards must have a single audit conducted in accordance with § 200.514 except when it elects
to have a program-specific audit conducted in accordance with paragraph (c) of this section.
(c) Program-specific audit election. When an auditee expends Federal awards under only one Federal program
(excluding R&D) and the Federal program's statutes, regulations, or the terms and conditions of the
Federal award do not require a financial statement audit of the auditee, the auditee may elect to have a
program-specific audit conducted in accordance with § 200.507. A program-specific audit may not be
elected for R&D unless all of the Federal awards expended were received from the same Federal agency,
or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through
entity in the case of a subrecipient, approves in advance a program-specific audit.
(d) Exemption when Federal awards expended are less than $750,000. A non-Federal entity that expends less
than $750,000 during the non-Federal entity's fiscal year in Federal awards is exempt from Federal audit
requirements for that year, except as noted in § 200.503, but records must be available for review or audit
by appropriate officials of the Federal agency, pass-through entity, and Government Accountability Office
(GAO).
(e) Federally Funded Research and Development Centers (FFRDC). Management of an auditee that owns or
operates a FFRDC may elect to treat the FFRDC as a separate entity for purposes of this part.
(f) Subrecipients and contractors. An auditee may simultaneously be a recipient, a subrecipient, and a
contractor. Federal awards expended as a recipient or a subrecipient are subject to audit under this part.
The payments received for goods or services provided as a contractor are not Federal awards. Section §
200.331 sets forth the considerations in determining whether payments constitute a Federal award or a
payment for goods or services provided as a contractor.
(g) Compliance responsibility for contractors. In most cases, the auditee's compliance responsibility for
contractors is only to ensure that the procurement, receipt, and payment for goods and services comply
with Federal statutes, regulations, and the terms and conditions of Federal awards. Federal award
compliance requirements normally do not pass through to contractors. However, the auditee is
responsible for ensuring compliance for procurement transactions which are structured such that the
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contractor is responsible for program compliance or the contractor's records must be reviewed to
determine program compliance. Also, when these procurement transactions relate to a major program,
the scope of the audit must include determining whether these transactions are in compliance with
Federal statutes, regulations, and the terms and conditions of Federal awards.
(h) For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass-through entity is
responsible for establishing requirements, as necessary, to ensure compliance by for-profit subrecipients.
The agreement with the for-profit subrecipient must describe applicable compliance requirements and the
for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards
made to for-profit subrecipients may include pre-award audits, monitoring during the agreement, and postaward audits. See also § 200.332.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020]

§ 200.502 Basis for determining Federal awards expended.
(a) Determining Federal awards expended. The determination of when a Federal award is expended must be
based on when the activity related to the Federal award occurs. Generally, the activity pertains to events
that require the non-Federal entity to comply with Federal statutes, regulations, and the terms and
conditions of Federal awards, such as: expenditure/expense transactions associated with awards
including grants, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, cooperative
agreements, and direct appropriations; the disbursement of funds to subrecipients; the use of loan
proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property;
the receipt or use of program income; the distribution or use of food commodities; the disbursement of
amounts entitling the non-Federal entity to an interest subsidy; and the period when insurance is in force.
(b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid,
the following guidelines must be used to calculate the value of Federal awards expended under loan
programs, except as noted in paragraphs (c) and (d) of this section:
(1) Value of new loans made or received during the audit period; plus
(2) Beginning of the audit period balance of loans from previous years for which the Federal Government
imposes continuing compliance requirements; plus
(3) Any interest subsidy, cash, or administrative cost allowance received.
(c) Loan and loan guarantees (loans) at IHEs. When loans are made to students of an IHE but the IHE does
not make the loans, then only the value of loans made during the audit period must be considered Federal
awards expended in that audit period. The balance of loans for previous audit periods is not included as
Federal awards expended because the lender accounts for the prior balances.
(d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior
years, are not considered Federal awards expended under this part when the Federal statutes, regulations,
and the terms and conditions of Federal awards pertaining to such loans impose no continuing
compliance requirements other than to repay the loans.
(e) Endowment funds. The cumulative balance of Federal awards for endowment funds that are federally
restricted are considered Federal awards expended in each audit period in which the funds are still
restricted.

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(f) Free rent. Free rent received by itself is not considered a Federal award expended under this part.
However, free rent received as part of a Federal award to carry out a Federal program must be included in
determining Federal awards expended and subject to audit under this part.
(g) Valuing non-cash assistance. Federal non-cash assistance, such as free rent, food commodities, donated
property, or donated surplus property, must be valued at fair market value at the time of receipt or the
assessed value provided by the Federal agency.
(h) Medicare. Medicare payments to a non-Federal entity for providing patient care services to Medicareeligible individuals are not considered Federal awards expended under this part.
(i)

Medicaid. Medicaid payments to a subrecipient for providing patient care services to Medicaid-eligible
individuals are not considered Federal awards expended under this part unless a state requires the funds
to be treated as Federal awards expended because reimbursement is on a cost-reimbursement basis.

(j)

Certain loans provided by the National Credit Union Administration. For purposes of this part, loans made
from the National Credit Union Share Insurance Fund and the Central Liquidity Facility that are funded by
contributions from insured non-Federal entities are not considered Federal awards expended.

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014]

§ 200.503 Relation to other audit requirements.
(a) An audit conducted in accordance with this part must be in lieu of any financial audit of Federal awards
which a non-Federal entity is required to undergo under any other Federal statute or regulation. To the
extent that such audit provides a Federal agency with the information it requires to carry out its
responsibilities under Federal statute or regulation, a Federal agency must rely upon and use that
information.
(b) Notwithstanding subsection (a), a Federal agency, Inspectors General, or GAO may conduct or arrange for
additional audits which are necessary to carry out its responsibilities under Federal statute or regulation.
The provisions of this part do not authorize any non-Federal entity to constrain, in any manner, such
Federal agency from carrying out or arranging for such additional audits, except that the Federal agency
must plan such audits to not be duplicative of other audits of Federal awards. Prior to commencing such
an audit, the Federal agency or pass-through entity must review the FAC for recent audits submitted by the
non-Federal entity, and to the extent such audits meet a Federal agency or pass-through entity's needs, the
Federal agency or pass-through entity must rely upon and use such audits. Any additional audits must be
planned and performed in such a way as to build upon work performed, including the audit
documentation, sampling, and testing already performed, by other auditors.
(c) The provisions of this part do not limit the authority of Federal agencies to conduct, or arrange for the
conduct of, audits and evaluations of Federal awards, nor limit the authority of any Federal agency
Inspector General or other Federal official. For example, requirements that may be applicable under the
FAR or CAS and the terms and conditions of a cost-reimbursement contract may include additional
applicable audits to be conducted or arranged for by Federal agencies.
(d) Federal agency to pay for additional audits. A Federal agency that conducts or arranges for additional
audits must, consistent with other applicable Federal statutes and regulations, arrange for funding the full
cost of such additional audits.

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(e) Request for a program to be audited as a major program. A Federal awarding agency may request that an
auditee have a particular Federal program audited as a major program in lieu of the Federal awarding
agency conducting or arranging for the additional audits. To allow for planning, such requests should be
made at least 180 calendar days prior to the end of the fiscal year to be audited. The auditee, after
consultation with its auditor, should promptly respond to such a request by informing the Federal
awarding agency whether the program would otherwise be audited as a major program using the riskbased audit approach described in § 200.518 and, if not, the estimated incremental cost. The Federal
awarding agency must then promptly confirm to the auditee whether it wants the program audited as a
major program. If the program is to be audited as a major program based upon this Federal awarding
agency request, and the Federal awarding agency agrees to pay the full incremental costs, then the
auditee must have the program audited as a major program. A pass-through entity may use the provisions
of this paragraph for a subrecipient.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49570, Aug. 13, 2020]

§ 200.504 Frequency of audits.
Except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this
part must be performed annually. Any biennial audit must cover both years within the biennial period.
(a) A state, local government, or Indian tribe that is required by constitution or statute, in effect on January 1,
1987, to undergo its audits less frequently than annually, is permitted to undergo its audits pursuant to
this part biennially. This requirement must still be in effect for the biennial period.
(b) Any nonprofit organization that had biennial audits for all biennial periods ending between July 1, 1992,
and January 1, 1995, is permitted to undergo its audits pursuant to this part biennially.

§ 200.505 Sanctions.
In cases of continued inability or unwillingness to have an audit conducted in accordance with this part, Federal
agencies and pass-through entities must take appropriate action as provided in § 200.339.
[85 FR 49571, Aug. 13, 2020]

§ 200.506 Audit costs.
See § 200.425.
[85 FR 49571, Aug. 13, 2020]

§ 200.507 Program-specific audits.
(a) Program-specific audit guide available. In some cases, a program-specific audit guide will be available to
provide specific guidance to the auditor with respect to internal controls, compliance requirements,
suggested audit procedures, and audit reporting requirements. A listing of current program-specific audit
guides can be found in the compliance supplement, Part 8, Appendix VI, Program-Specific Audit Guides,
which includes a website where a copy of the guide can be obtained. When a current program-specific
audit guide is available, the auditor must follow GAGAS and the guide when performing a programspecific audit.
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(b) Program-specific audit guide not available.
(1) When a current program-specific audit guide is not available, the auditee and auditor must have
basically the same responsibilities for the Federal program as they would have for an audit of a
major program in a single audit.
(2) The auditee must prepare the financial statement(s) for the Federal program that includes, at a
minimum, a schedule of expenditures of Federal awards for the program and notes that describe the
significant accounting policies used in preparing the schedule, a summary schedule of prior audit
findings consistent with the requirements of § 200.511(b), and a corrective action plan consistent
with the requirements of § 200.511(c).
(3) The auditor must:
(i)

Perform an audit of the financial statement(s) for the Federal program in accordance with
GAGAS;

(ii) Obtain an understanding of internal controls and perform tests of internal controls over the
Federal program consistent with the requirements of § 200.514(c) for a major program;
(iii) Perform procedures to determine whether the auditee has complied with Federal statutes,
regulations, and the terms and conditions of Federal awards that could have a direct and
material effect on the Federal program consistent with the requirements of § 200.514(d) for a
major program;
(iv) Follow up on prior audit findings, perform procedures to assess the reasonableness of the
summary schedule of prior audit findings prepared by the auditee in accordance with the
requirements of § 200.511, and report, as a current year audit finding, when the auditor
concludes that the summary schedule of prior audit findings materially misrepresents the
status of any prior audit finding; and
(v) Report any audit findings consistent with the requirements of § 200.516.
(4) The auditor's report(s) may be in the form of either combined or separate reports and may be
organized differently from the manner presented in this section. The auditor's report(s) must state
that the audit was conducted in accordance with this part and include the following:
(i)

An opinion (or disclaimer of opinion) as to whether the financial statement(s) of the Federal
program is presented fairly in all material respects in accordance with the stated accounting
policies;

(ii) A report on internal control related to the Federal program, which must describe the scope of
testing of internal control and the results of the tests;
(iii) A report on compliance which includes an opinion (or disclaimer of opinion) as to whether the
auditee complied with laws, regulations, and the terms and conditions of Federal awards which
could have a direct and material effect on the Federal program; and
(iv) A schedule of findings and questioned costs for the Federal program that includes a summary
of the auditor's results relative to the Federal program in a format consistent with §
200.515(d)(1) and findings and questioned costs consistent with the requirements of §
200.515(d)(3).
(c) Report submission for program-specific audits.
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(1) The audit must be completed and the reporting required by paragraph (c)(2) or (c)(3) of this section
submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine
months after the end of the audit period, unless a different period is specified in a program-specific
audit guide. Unless restricted by Federal law or regulation, the auditee must make report copies
available for public inspection. Auditees and auditors must ensure that their respective parts of the
reporting package do not include protected personally identifiable information.
(2) When a program-specific audit guide is available, the auditee must electronically submit to the FAC
the data collection form prepared in accordance with § 200.512(b), as applicable to a programspecific audit, and the reporting required by the program-specific audit guide.
(3) When a program-specific audit guide is not available, the reporting package for a program-specific
audit must consist of the financial statement(s) of the Federal program, a summary schedule of prior
audit findings, and a corrective action plan as described in paragraph (b)(2) of this section, and the
auditor's report(s) described in paragraph (b)(4) of this section. The data collection form prepared in
accordance with § 200.512(b), as applicable to a program-specific audit, and one copy of this
reporting package must be electronically submitted to the FAC.
(d) Other sections of this part may apply. Program-specific audits are subject to:
(1) 200.500 Purpose through 200.503 Relation to other audit requirements, paragraph (d);
(2) 200.504 Frequency of audits through 200.506 Audit costs;
(3) 200.508 Auditee responsibilities through 200.509 Auditor selection;
(4) 200.511 Audit findings follow-up;
(5) 200.512 Report submission, paragraphs (e) through (h);
(6) 200.513 Responsibilities;
(7) 200.516 Audit findings through 200.517 Audit documentation;
(8) 200.521 Management decision; and
(9) Other referenced provisions of this part unless contrary to the provisions of this section, a programspecific audit guide, or program statutes and regulations.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, 2020]

AUDITEES
§ 200.508 Auditee responsibilities.
The auditee must:
(a) Procure or otherwise arrange for the audit required by this part in accordance with § 200.509, and ensure
it is properly performed and submitted when due in accordance with § 200.512.
(b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in
accordance with § 200.510.

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(c) Promptly follow up and take corrective action on audit findings, including preparation of a summary
schedule of prior audit findings and a corrective action plan in accordance with § 200.511(b) and (c),
respectively.
(d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and
other information as needed for the auditor to perform the audit required by this part.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020]

§ 200.509 Auditor selection.
(a) Auditor procurement. In procuring audit services, the auditee must follow the procurement standards
prescribed by the Procurement Standards in §§ 200.317 through 200.327 of subpart D of this part or the
FAR (48 CFR part 42), as applicable. In requesting proposals for audit services, the objectives and scope
of the audit must be made clear and the non-Federal entity must request a copy of the audit organization's
peer review report which the auditor is required to provide under GAGAS. Factors to be considered in
evaluating each proposal for audit services include the responsiveness to the request for proposal,
relevant experience, availability of staff with professional qualifications and technical abilities, the results
of peer and external quality control reviews, and price. Whenever possible, the auditee must make positive
efforts to utilize small businesses, minority-owned firms, and women's business enterprises, in procuring
audit services as stated in § 200.321, or the FAR (48 CFR part 42), as applicable.
(b) Restriction on auditor preparing indirect cost proposals. An auditor who prepares the indirect cost
proposal or cost allocation plan may not also be selected to perform the audit required by this part when
the indirect costs recovered by the auditee during the prior year exceeded $1 million. This restriction
applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan and
any subsequent years in which the resulting indirect cost agreement or cost allocation plan is used to
recover costs.
(c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if
they comply fully with the requirements of this part.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020; 86 FR 10440, Feb. 22, 2021]

§ 200.510 Financial statements.
(a) Financial statements. The auditee must prepare financial statements that reflect its financial position,
results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year
audited. The financial statements must be for the same organizational unit and fiscal year that is chosen
to meet the requirements of this part. However, non-Federal entity-wide financial statements may also
include departments, agencies, and other organizational units that have separate audits in accordance
with § 200.514(a) and prepare separate financial statements.
(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of
Federal awards for the period covered by the auditee's financial statements which must include the total
Federal awards expended as determined in accordance with § 200.502. While not required, the auditee
may choose to provide information requested by Federal awarding agencies and pass-through entities to
make the schedule easier to use. For example, when a Federal program has multiple Federal award years,
the auditee may list the amount of Federal awards expended for each Federal award year separately. At a
minimum, the schedule must:
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(1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster
name, list individual Federal programs within the cluster of programs, and provide the applicable
Federal agency name. For R&D, total Federal awards expended must be shown either by individual
Federal award or by Federal agency and major subdivision within the Federal agency. For example,
the National Institutes of Health is a major subdivision in the Department of Health and Human
Services.
(2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying
number assigned by the pass-through entity must be included.
(3) Provide total Federal awards expended for each individual Federal program and the Assistance
Listings Number or other identifying number when the Assistance Listings information is not
available. For a cluster of programs also provide the total for the cluster.
(4) Include the total amount provided to subrecipients from each Federal program.
(5) For loan or loan guarantee programs described in § 200.502(b), identify in the notes to the schedule
the balances outstanding at the end of the audit period. This is in addition to including the total
Federal awards expended for loan or loan guarantee programs in the schedule.
(6) Include notes that describe that significant accounting policies used in preparing the schedule, and
note whether or not the auditee elected to use the 10% de minimis cost rate as covered in § 200.414.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49572, Aug. 13, 2020]

§ 200.511 Audit findings follow-up.
(a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this
responsibility, the auditee must prepare a summary schedule of prior audit findings. The auditee must
also prepare a corrective action plan for current year audit findings. The summary schedule of prior audit
findings and the corrective action plan must include the reference numbers the auditor assigns to audit
findings under § 200.516(c). Since the summary schedule may include audit findings from multiple years,
it must include the fiscal year in which the finding initially occurred. The corrective action plan and
summary schedule of prior audit findings must include findings relating to the financial statements which
are required to be reported in accordance with GAGAS.
(b) Summary schedule of prior audit findings. The summary schedule of prior audit findings must report the
status of all audit findings included in the prior audit's schedule of findings and questioned costs. The
summary schedule must also include audit findings reported in the prior audit's summary schedule of
prior audit findings except audit findings listed as corrected in accordance with paragraph (b)(1) of this
section, or no longer valid or not warranting further action in accordance with paragraph (b)(3) of this
section.
(1) When audit findings were fully corrected, the summary schedule need only list the audit findings and
state that corrective action was taken.
(2) When audit findings were not corrected or were only partially corrected, the summary schedule must
describe the reasons for the finding's recurrence and planned corrective action, and any partial
corrective action taken. When corrective action taken is significantly different from corrective action
previously reported in a corrective action plan or in the Federal agency's or pass-through entity's
management decision, the summary schedule must provide an explanation.
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(3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the
reasons for this position must be described in the summary schedule. A valid reason for considering
an audit finding as not warranting further action is that all of the following have occurred:
(i)

Two years have passed since the audit report in which the finding occurred was submitted to
the FAC;

(ii) The Federal agency or pass-through entity is not currently following up with the auditee on the
audit finding; and
(iii) A management decision was not issued.
(c) Corrective action plan. At the completion of the audit, the auditee must prepare, in a document separate
from the auditor's findings described in § 200.516, a corrective action plan to address each audit finding
included in the current year auditor's reports. The corrective action plan must provide the name(s) of the
contact person(s) responsible for corrective action, the corrective action planned, and the anticipated
completion date. If the auditee does not agree with the audit findings or believes corrective action is not
required, then the corrective action plan must include an explanation and specific reasons.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49572, Aug. 13, 2020]

§ 200.512 Report submission.
(a) General.
(1) The audit must be completed and the data collection form described in paragraph (b) of this section
and reporting package described in paragraph (c) of this section must be submitted within the earlier
of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit
period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due
the next business day.
(2) Unless restricted by Federal statutes or regulations, the auditee must make copies available for
public inspection. Auditees and auditors must ensure that their respective parts of the reporting
package do not include protected personally identifiable information.
(b) Data collection. The FAC is the repository of record for subpart F of this part reporting packages and the
data collection form. All Federal agencies, pass-through entities and others interested in a reporting
package and data collection form must obtain it by accessing the FAC.
(1) The auditee must submit required data elements described in Appendix X to Part 200, which state
whether the audit was completed in accordance with this part and provides information about the
auditee, its Federal programs, and the results of the audit. The data must include information
available from the audit required by this part that is necessary for Federal agencies to use the audit
to ensure integrity for Federal programs. The data elements and format must be approved by OMB,
available from the FAC, and include collections of information from the reporting package described
in paragraph (c) of this section. A senior level representative of the auditee (e.g., state controller,
director of finance, chief executive officer, or chief financial officer) must sign a statement to be
included as part of the data collection that says that the auditee complied with the requirements of
this part, the data were prepared in accordance with this part (and the instructions accompanying
the form), the reporting package does not include protected personally identifiable information, the
information included in its entirety is accurate and complete, and that the FAC is authorized to make
the reporting package and the form publicly available on a website.
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(2) Exception for Indian Tribes and Tribal Organizations. An auditee that is an Indian tribe or a tribal
organization (as defined in the Indian Self-Determination, Education and Assistance Act (ISDEAA), 25
U.S.C. 450b(l)) may opt not to authorize the FAC to make the reporting package publicly available on
a Web site, by excluding the authorization for the FAC publication in the statement described in
paragraph (b)(1) of this section. If this option is exercised, the auditee becomes responsible for
submitting the reporting package directly to any pass-through entities through which it has received
a Federal award and to pass-through entities for which the summary schedule of prior audit findings
reported the status of any findings related to Federal awards that the pass-through entity provided.
Unless restricted by Federal statute or regulation, if the auditee opts not to authorize publication, it
must make copies of the reporting package available for public inspection.
(3) Using the information included in the reporting package described in paragraph (c) of this section,
the auditor must complete the applicable data elements of the data collection form. The auditor
must sign a statement to be included as part of the data collection form that indicates, at a
minimum, the source of the information included in the form, the auditor's responsibility for the
information, that the form is not a substitute for the reporting package described in paragraph (c) of
this section, and that the content of the form is limited to the collection of information prescribed by
OMB.
(c) Reporting package. The reporting package must include the:
(1) Financial statements and schedule of expenditures of Federal awards discussed in § 200.510(a) and
(b), respectively;
(2) Summary schedule of prior audit findings discussed in § 200.511(b);
(3) Auditor's report(s) discussed in § 200.515; and
(4) Corrective action plan discussed in § 200.511(c).
(d) Submission to FAC. The auditee must electronically submit to the FAC the data collection form described
in paragraph (b) of this section and the reporting package described in paragraph (c) of this section.
(e) Requests for management letters issued by the auditor. In response to requests by a Federal agency or
pass-through entity, auditees must submit a copy of any management letters issued by the auditor.
(f) Report retention requirements. Auditees must keep one copy of the data collection form described in
paragraph (b) of this section and one copy of the reporting package described in paragraph (c) of this
section on file for three years from the date of submission to the FAC.
(g) FAC responsibilities. The FAC must make available the reporting packages received in accordance with
paragraph (c) of this section and § 200.507(c) to the public, except for Indian tribes exercising the option
in (b)(2) of this section, and maintain a data base of completed audits, provide appropriate information to
Federal agencies, and follow up with known auditees that have not submitted the required data collection
forms and reporting packages.
(h) Electronic filing. Nothing in this part must preclude electronic submissions to the FAC in such manner as
may be approved by OMB.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020]

FEDERAL AGENCIES
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§ 200.513 Responsibilities.
(a)
(1) Cognizant agency for audit responsibilities. A non-Federal entity expending more than $50 million a
year in Federal awards must have a cognizant agency for audit. The designated cognizant agency for
audit must be the Federal awarding agency that provides the predominant amount of funding directly
(direct funding) (as listed on the Schedule of expenditures of Federal awards, see § 200.510(b)) to a
non-Federal entity unless OMB designates a specific cognizant agency for audit. When the direct
funding represents less than 25 percent of the total expenditures (as direct and subawards) by the
non-Federal entity, then the Federal agency with the predominant amount of total funding is the
designated cognizant agency for audit.
(2) To provide for continuity of cognizance, the determination of the predominant amount of direct
funding must be based upon direct Federal awards expended in the non-Federal entity's fiscal years
ending in 2019, and every fifth year thereafter.
(3) Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency
with cognizance for an auditee may reassign cognizance to another Federal awarding agency that
provides substantial funding and agrees to be the cognizant agency for audit. Within 30 calendar
days after any reassignment, both the old and the new cognizant agency for audit must provide
notice of the change to the FAC, the auditee, and, if known, the auditor. The cognizant agency for
audit must:
(i)

Provide technical audit advice and liaison assistance to auditees and auditors.

(ii) Obtain or conduct quality control reviews on selected audits made by non-Federal auditors, and
provide the results to other interested organizations. Cooperate and provide support to the
Federal agency designated by OMB to lead a governmentwide project to determine the quality
of single audits by providing a reliable estimate of the extent that single audits conform to
applicable requirements, standards, and procedures; and to make recommendations to address
noted audit quality issues, including recommendations for any changes to applicable
requirements, standards and procedures indicated by the results of the project. The
governmentwide project can rely on the current and on-going quality control review work
performed by the agencies, State auditors, and professional audit associations. This
governmentwide audit quality project must be performed once every 6 years (or at such other
interval as determined by OMB), and the results must be public.
(iii) Promptly inform other affected Federal agencies and appropriate Federal law enforcement
officials of any direct reporting by the auditee or its auditor required by GAGAS or statutes and
regulations.
(iv) Advise the community of independent auditors of any noteworthy or important factual trends
related to the quality of audits stemming from quality control reviews. Significant problems or
quality issues consistently identified through quality control reviews of audit reports must be
referred to appropriate state licensing agencies and professional bodies.
(v) Advise the auditor, Federal awarding agencies, and, where appropriate, the auditee of any
deficiencies found in the audits when the deficiencies require corrective action by the auditor.
When advised of deficiencies, the auditee must work with the auditor to take corrective action.
If corrective action is not taken, the cognizant agency for audit must notify the auditor, the
auditee, and applicable Federal awarding agencies and pass-through entities of the facts and
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make recommendations for follow-up action. Major inadequacies or repetitive substandard
performance by auditors must be referred to appropriate state licensing agencies and
professional bodies for disciplinary action.
(vi) Coordinate, to the extent practical, audits or reviews made by or for Federal agencies that are in
addition to the audits made pursuant to this part, so that the additional audits or reviews build
upon rather than duplicate audits performed in accordance with this part.
(vii) Coordinate a management decision for cross-cutting audit findings (see in § 200.1 of this part)
that affect the Federal programs of more than one agency when requested by any Federal
awarding agency whose awards are included in the audit finding of the auditee.
(viii) Coordinate the audit work and reporting responsibilities among auditors to achieve the most
cost-effective audit.
(ix) Provide advice to auditees as to how to handle changes in fiscal years.
(b) Oversight agency for audit responsibilities. An auditee who does not have a designated cognizant agency
for audit will be under the general oversight of the Federal agency determined in accordance with § 200.1
oversight agency for audit. A Federal agency with oversight for an auditee may reassign oversight to
another Federal agency that agrees to be the oversight agency for audit. Within 30 calendar days after any
reassignment, both the old and the new oversight agency for audit must provide notice of the change to
the FAC, the auditee, and, if known, the auditor. The oversight agency for audit:
(1) Must provide technical advice to auditees and auditors as requested.
(2) May assume all or some of the responsibilities normally performed by a cognizant agency for audit.
(c) Federal awarding agency responsibilities. The Federal awarding agency must perform the following for the
Federal awards it makes (See also the requirements of § 200.211):
(1) Ensure that audits are completed and reports are received in a timely manner and in accordance with
the requirements of this part.
(2) Provide technical advice and counsel to auditees and auditors as requested.
(3) Follow-up on audit findings to ensure that the recipient takes appropriate and timely corrective
action. As part of audit follow-up, the Federal awarding agency must:
(i)

Issue a management decision as prescribed in § 200.521;

(ii) Monitor the recipient taking appropriate and timely corrective action;
(iii) Use cooperative audit resolution mechanisms (see the definition of cooperative audit resolution
in § 200.1 of this part) to improve Federal program outcomes through better audit resolution,
follow-up, and corrective action; and
(iv) Develop a baseline, metrics, and targets to track, over time, the effectiveness of the Federal
agency's process to follow-up on audit findings and on the effectiveness of Single Audits in
improving non-Federal entity accountability and their use by Federal awarding agencies in
making award decisions.

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(4) Provide OMB annual updates to the compliance supplement and work with OMB to ensure that the
compliance supplement focuses the auditor to test the compliance requirements most likely to
cause improper payments, fraud, waste, abuse or generate audit finding for which the Federal
awarding agency will take sanctions.
(5) Provide OMB with the name of a single audit accountable official from among the senior policy
officials of the Federal awarding agency who must be:
(i)

Responsible for ensuring that the agency fulfills all the requirements of paragraph (c) of this
section and effectively uses the single audit process to reduce improper payments and improve
Federal program outcomes.

(ii) Held accountable to improve the effectiveness of the single audit process based upon metrics
as described in paragraph (c)(3)(iv) of this section.
(iii) Responsible for designating the Federal agency's key management single audit liaison.
(6) Provide OMB with the name of a key management single audit liaison who must:
(i)

Serve as the Federal awarding agency's management point of contact for the single audit
process both within and outside the Federal Government.

(ii) Promote interagency coordination, consistency, and sharing in areas such as coordinating audit
follow-up; identifying higher-risk non-Federal entities; providing input on single audit and followup policy; enhancing the utility of the FAC; and studying ways to use single audit results to
improve Federal award accountability and best practices.
(iii) Oversee training for the Federal awarding agency's program management personnel related to
the single audit process.
(iv) Promote the Federal awarding agency's use of cooperative audit resolution mechanisms.
(v) Coordinate the Federal awarding agency's activities to ensure appropriate and timely follow-up
and corrective action on audit findings.
(vi) Organize the Federal cognizant agency for audit's follow-up on cross-cutting audit findings that
affect the Federal programs of more than one Federal awarding agency.
(vii) Ensure the Federal awarding agency provides annual updates of the compliance supplement to
OMB.
(viii) Support the Federal awarding agency's single audit accountable official's mission.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, 2020]

AUDITORS
§ 200.514 Scope of audit.
(a) General. The audit must be conducted in accordance with GAGAS. The audit must cover the entire
operations of the auditee, or, at the option of the auditee, such audit must include a series of audits that
cover departments, agencies, and other organizational units that expended or otherwise administered
Federal awards during such audit period, provided that each such audit must encompass the financial

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statements and schedule of expenditures of Federal awards for each such department, agency, and other
organizational unit, which must be considered to be a non-Federal entity. The financial statements and
schedule of expenditures of Federal awards must be for the same audit period.
(b) Financial statements. The auditor must determine whether the financial statements of the auditee are
presented fairly in all material respects in accordance with generally accepted accounting principles. The
auditor must also determine whether the schedule of expenditures of Federal awards is stated fairly in all
material respects in relation to the auditee's financial statements as a whole.
(c) Internal control.
(1) The compliance supplement provides guidance on internal controls over Federal programs based
upon the guidance in Standards for Internal Control in the Federal Government issued by the
Comptroller General of the United States and the Internal Control—Integrated Framework, issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
(2) In addition to the requirements of GAGAS, the auditor must perform procedures to obtain an
understanding of internal control over Federal programs sufficient to plan the audit to support a low
assessed level of control risk of noncompliance for major programs.
(3) Except as provided in paragraph (c)(4) of this section, the auditor must:
(i)

Plan the testing of internal control over compliance for major programs to support a low
assessed level of control risk for the assertions relevant to the compliance requirements for
each major program; and

(ii) Perform testing of internal control as planned in paragraph (c)(3)(i) of this section.
(4) When internal control over some or all of the compliance requirements for a major program are likely
to be ineffective in preventing or detecting noncompliance, the planning and performing of testing
described in paragraph (c)(3) of this section are not required for those compliance requirements.
However, the auditor must report a significant deficiency or material weakness in accordance with §
200.516, assess the related control risk at the maximum, and consider whether additional
compliance tests are required because of ineffective internal control.
(d) Compliance.
(1) In addition to the requirements of GAGAS, the auditor must determine whether the auditee has
complied with Federal statutes, regulations, and the terms and conditions of Federal awards that
may have a direct and material effect on each of its major programs.
(2) The principal compliance requirements applicable to most Federal programs and the compliance
requirements of the largest Federal programs are included in the compliance supplement.
(3) For the compliance requirements related to Federal programs contained in the compliance
supplement, an audit of these compliance requirements will meet the requirements of this part.
Where there have been changes to the compliance requirements and the changes are not reflected
in the compliance supplement, the auditor must determine the current compliance requirements and
modify the audit procedures accordingly. For those Federal programs not covered in the compliance
supplement, the auditor must follow the compliance supplement's guidance for programs not
included in the supplement.

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(4) When internal control over some or all of the compliance requirements for a major program are likely
to be ineffective in preventing or detecting noncompliance, the planning and performing of testing
described in paragraph (c)(3) of this section are not required for those compliance requirements.
However, the auditor must report a significant deficiency or material weakness in accordance with §
200.516, assess the related control risk at the
(e) Audit follow-up. The auditor must follow-up on prior audit findings, perform procedures to assess the
reasonableness of the summary schedule of prior audit findings prepared by the auditee in accordance
with § 200.511(b), and report, as a current year audit finding, when the auditor concludes that the
summary schedule of prior audit findings materially misrepresents the status of any prior audit finding.
The auditor must perform audit follow-up procedures regardless of whether a prior audit finding relates to
a major program in the current year.
(f) Data collection form. As required in § 200.512(b)(3), the auditor must complete and sign specified
sections of the data collection form.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020; 86 FR 10440, Feb. 22, 2021]

§ 200.515 Audit reporting.
The auditor's report(s) may be in the form of either combined or separate reports and may be organized differently
from the manner presented in this section. The auditor's report(s) must state that the audit was conducted in
accordance with this part and include the following:
(a) Financial statements. The auditor must determine and provide an opinion (or disclaimer of opinion)
whether the financial statements of the auditee are presented fairly in all materials respects in
accordance with generally accepted accounting principles (or a special purpose framework such as cash,
modified cash, or regulatory as required by state law). The auditor must also decide whether the schedule
of expenditures of Federal awards is stated fairly in all material respects in relation to the auditee's
financial statements as a whole.
(b) A report on internal control over financial reporting and compliance with provisions of laws, regulations,
contracts, and award agreements, noncompliance with which could have a material effect on the financial
statements. This report must describe the scope of testing of internal control and compliance and the
results of the tests, and, where applicable, it will refer to the separate schedule of findings and questioned
costs described in paragraph (d) of this section.
(c) A report on compliance for each major program and a report on internal control over compliance. This
report must describe the scope of testing of internal control over compliance, include an opinion or
disclaimer of opinion as to whether the auditee complied with Federal statutes, regulations, and the terms
and conditions of Federal awards which could have a direct and material effect on each major program
and refer to the separate schedule of findings and questioned costs described in paragraph (d) of this
section.
(d) A schedule of findings and questioned costs which must include the following three components:
(1) A summary of the auditor's results, which must include:
(i)

The type of report the auditor issued on whether the financial statements audited were
prepared in accordance with GAAP (i.e., unmodified opinion, qualified opinion, adverse opinion,
or disclaimer of opinion);

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(ii) Where applicable, a statement about whether significant deficiencies or material weaknesses in
internal control were disclosed by the audit of the financial statements;
(iii) A statement as to whether the audit disclosed any noncompliance that is material to the
financial statements of the auditee;
(iv) Where applicable, a statement about whether significant deficiencies or material weaknesses in
internal control over major programs were disclosed by the audit;
(v) The type of report the auditor issued on compliance for major programs (i.e., unmodified
opinion, qualified opinion, adverse opinion, or disclaimer of opinion);
(vi) A statement as to whether the audit disclosed any audit findings that the auditor is required to
report under § 200.516(a);
(vii) An identification of major programs by listing each individual major program; however, in the
case of a cluster of programs, only the cluster name as shown on the Schedule of Expenditures
of Federal Awards is required;
(viii) The dollar threshold used to distinguish between Type A and Type B programs, as described in
§ 200.518(b)(1) or (3) when a recalculation of the Type A threshold is required for large loan or
loan guarantees; and
(ix) A statement as to whether the auditee qualified as a low-risk auditee under § 200.520.
(2) Findings relating to the financial statements which are required to be reported in accordance with
GAGAS.
(3) Findings and questioned costs for Federal awards which must include audit findings as defined in §
200.516(a).
(i)

Audit findings (e.g., internal control findings, compliance findings, questioned costs, or fraud)
that relate to the same issue must be presented as a single audit finding. Where practical, audit
findings should be organized by Federal agency or pass-through entity.

(ii) Audit findings that relate to both the financial statements and Federal awards, as reported
under paragraphs (d)(2) and (d)(3) of this section, respectively, must be reported in both
sections of the schedule. However, the reporting in one section of the schedule may be in
summary form with a reference to a detailed reporting in the other section of the schedule.
(e) Nothing in this part precludes combining of the audit reporting required by this section with the reporting
required by § 200.512(b) when allowed by GAGAS and appendix X to this part.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020]

§ 200.516 Audit findings.
(a) Audit findings reported. The auditor must report the following as audit findings in a schedule of findings
and questioned costs:

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(1) Significant deficiencies and material weaknesses in internal control over major programs and
significant instances of abuse relating to major programs. The auditor's determination of whether a
deficiency in internal control is a significant deficiency or a material weakness for the purpose of
reporting an audit finding is in relation to a type of compliance requirement for a major program
identified in the Compliance Supplement.
(2) Material noncompliance with the provisions of Federal statutes, regulations, or the terms and
conditions of Federal awards related to a major program. The auditor's determination of whether a
noncompliance with the provisions of Federal statutes, regulations, or the terms and conditions of
Federal awards is material for the purpose of reporting an audit finding is in relation to a type of
compliance requirement for a major program identified in the compliance supplement.
(3) Known questioned costs that are greater than $25,000 for a type of compliance requirement for a
major program. Known questioned costs are those specifically identified by the auditor. In evaluating
the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate
of total costs questioned (likely questioned costs), not just the questioned costs specifically
identified (known questioned costs). The auditor must also report known questioned costs when
likely questioned costs are greater than $25,000 for a type of compliance requirement for a major
program. In reporting questioned costs, the auditor must include information to provide proper
perspective for judging the prevalence and consequences of the questioned costs.
(4) Known questioned costs that are greater than $25,000 for a Federal program which is not audited as
a major program. Except for audit follow-up, the auditor is not required under this part to perform
audit procedures for such a Federal program; therefore, the auditor will normally not find questioned
costs for a program that is not audited as a major program. However, if the auditor does become
aware of questioned costs for a Federal program that is not audited as a major program (e.g., as part
of audit follow-up or other audit procedures) and the known questioned costs are greater than
$25,000, then the auditor must report this as an audit finding.
(5) The circumstances concerning why the auditor's report on compliance for each major program is
other than an unmodified opinion, unless such circumstances are otherwise reported as audit
findings in the schedule of findings and questioned costs for Federal awards.
(6) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit
finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not
require the auditor to report publicly information which could compromise investigative or legal
proceedings or to make an additional reporting when the auditor confirms that the fraud was
reported outside the auditor's reports under the direct reporting requirements of GAGAS.
(7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of
prior audit findings prepared by the auditee in accordance with § 200.511(b) materially
misrepresents the status of any prior audit finding.
(b) Audit finding detail and clarity. Audit findings must be presented in sufficient detail and clarity for the
auditee to prepare a corrective action plan and take corrective action, and for Federal agencies and passthrough entities to arrive at a management decision. The following specific information must be included,
as applicable, in audit findings:

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(1) Federal program and specific Federal award identification including the Assistance Listings title and
number, Federal award identification number and year, name of Federal agency, and name of the
applicable pass-through entity. When information, such as the Assistance Listings title and number
or Federal award identification number, is not available, the auditor must provide the best
information available to describe the Federal award.
(2) The criteria or specific requirement upon which the audit finding is based, including the Federal
statutes, regulations, or the terms and conditions of the Federal awards. Criteria generally identify
the required or desired state or expectation with respect to the program or operation. Criteria provide
a context for evaluating evidence and understanding findings.
(3) The condition found, including facts that support the deficiency identified in the audit finding.
(4) A statement of cause that identifies the reason or explanation for the condition or the factors
responsible for the difference between the situation that exists (condition) and the required or
desired state (criteria), which may also serve as a basis for recommendations for corrective action.
(5) The possible asserted effect to provide sufficient information to the auditee and Federal agency, or
pass-through entity in the case of a subrecipient, to permit them to determine the cause and effect
to facilitate prompt and proper corrective action. A statement of the effect or potential effect should
provide a clear, logical link to establish the impact or potential impact of the difference between the
condition and the criteria.
(6) Identification of questioned costs and how they were computed. Known questioned costs must be
identified by applicable Assistance Listings number(s) and applicable Federal award identification
number(s).
(7) Information to provide proper perspective for judging the prevalence and consequences of the audit
findings, such as whether the audit findings represent an isolated instance or a systemic problem.
Where appropriate, instances identified must be related to the universe and the number of cases
examined and be quantified in terms of dollar value. The auditor should report whether the sampling
was a statistically valid sample.
(8) Identification of whether the audit finding was a repeat of a finding in the immediately prior audit and
if so any applicable prior year audit finding numbers.
(9) Recommendations to prevent future occurrences of the deficiency identified in the audit finding.
(10) Views of responsible officials of the auditee.
(c) Reference numbers. Each audit finding in the schedule of findings and questioned costs must include a
reference number in the format meeting the requirements of the data collection form submission required
by § 200.512(b) to allow for easy referencing of the audit findings during follow-up.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49574, Aug. 13, 2020]

§ 200.517 Audit documentation.
(a) Retention of audit documentation. The auditor must retain audit documentation and reports for a
minimum of three years after the date of issuance of the auditor's report(s) to the auditee, unless the
auditor is notified in writing by the cognizant agency for audit, oversight agency for audit, cognizant
agency for indirect costs, or pass-through entity to extend the retention period. When the auditor is aware
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that the Federal agency, pass-through entity, or auditee is contesting an audit finding, the auditor must
contact the parties contesting the audit finding for guidance prior to destruction of the audit
documentation and reports.
(b) Access to audit documentation. Audit documentation must be made available upon request to the
cognizant or oversight agency for audit or its designee, cognizant agency for indirect cost, a Federal
agency, or GAO at the completion of the audit, as part of a quality review, to resolve audit findings, or to
carry out oversight responsibilities consistent with the purposes of this part. Access to audit
documentation includes the right of Federal agencies to obtain copies of audit documentation, as is
reasonable and necessary.

§ 200.518 Major program determination.
(a) General. The auditor must use a risk-based approach to determine which Federal programs are major
programs. This risk-based approach must include consideration of: current and prior audit experience,
oversight by Federal agencies and pass-through entities, and the inherent risk of the Federal program. The
process in paragraphs (b) through (h) of this section must be followed.
(b) Step one.
(1) The auditor must identify the larger Federal programs, which must be labeled Type A programs. Type
A programs are defined as Federal programs with Federal awards expended during the audit period
exceeding the levels outlined in the table in this paragraph (b)(1):
Total Federal awards expended

Type A/B threshold

Equal to or exceed $750,000 but less than or equal to $25
million

$750,000.

Exceed $25 million but less than or equal to $100 million

Total Federal awards expended times .03.

Exceed $100 million but less than or equal to $1 billion

$3 million.

Exceed $1 billion but less than or equal to $10 billion

Total Federal awards expended times
.003.

Exceed $10 billion but less than or equal to $20 billion

$30 million.

Exceed $20 billion

Total Federal awards expended times
.0015.

(2) Federal programs not labeled Type A under paragraph (b)(1) of this section must be labeled Type B
programs.
(3) The inclusion of large loan and loan guarantees (loans) must not result in the exclusion of other
programs as Type A programs. When a Federal program providing loans exceeds four times the
largest non-loan program it is considered a large loan program, and the auditor must consider this
Federal program as a Type A program and exclude its values in determining other Type A programs.
This recalculation of the Type A program is performed after removing the total of all large loan
programs. For the purposes of this paragraph a program is only considered to be a Federal program
providing loans if the value of Federal awards expended for loans within the program comprises fifty
percent or more of the total Federal awards expended for the program. A cluster of programs is
treated as one program and the value of Federal awards expended under a loan program is
determined as described in § 200.502.

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(4) For biennial audits permitted under § 200.504, the determination of Type A and Type B programs
must be based upon the Federal awards expended during the two-year period.
(c) Step two.
(1) The auditor must identify Type A programs which are low-risk. In making this determination, the
auditor must consider whether the requirements in § 200.519(c), the results of audit follow-up, or
any changes in personnel or systems affecting the program indicate significantly increased risk and
preclude the program from being low risk. For a Type A program to be considered low-risk, it must
have been audited as a major program in at least one of the two most recent audit periods (in the
most recent audit period in the case of a biennial audit), and, in the most recent audit period, the
program must have not had:
(i)

Internal control deficiencies which were identified as material weaknesses in the auditor's
report on internal control for major programs as required under § 200.515(c);

(ii) A modified opinion on the program in the auditor's report on major programs as required under
§ 200.515(c); or
(iii) Known or likely questioned costs that exceed five percent of the total Federal awards expended
for the program.
(2) Notwithstanding paragraph (c)(1) of this section, OMB may approve a Federal awarding agency's
request that a Type A program may not be considered low risk for a certain recipient. For example, it
may be necessary for a large Type A program to be audited as a major program each year at a
particular recipient to allow the Federal awarding agency to comply with 31 U.S.C. 3515. The Federal
awarding agency must notify the recipient and, if known, the auditor of OMB's approval at least 180
calendar days prior to the end of the fiscal year to be audited.
(d) Step three.
(1) The auditor must identify Type B programs which are high-risk using professional judgment and the
criteria in § 200.519. However, the auditor is not required to identify more high-risk Type B programs
than at least one fourth the number of low-risk Type A programs identified as low-risk under Step 2
(paragraph (c) of this section). Except for known material weakness in internal control or compliance
problems as discussed in § 200.519(b)(1) and (2) and (c)(1), a single criterion in risk would seldom
cause a Type B program to be considered high-risk. When identifying which Type B programs to risk
assess, the auditor is encouraged to use an approach which provides an opportunity for different
high-risk Type B programs to be audited as major over a period of time.
(2) The auditor is not expected to perform risk assessments on relatively small Federal programs.
Therefore, the auditor is only required to perform risk assessments on Type B programs that exceed
twenty-five percent (0.25) of the Type A threshold determined in Step 1 (paragraph (b) of this
section).
(e) Step four. At a minimum, the auditor must audit all of the following as major programs:
(1) All Type A programs not identified as low risk under step two (paragraph (c)(1) of this section).
(2) All Type B programs identified as high-risk under step three (paragraph (d) of this section).
(3) Such additional programs as may be necessary to comply with the percentage of coverage rule
discussed in paragraph (f) of this section. This may require the auditor to audit more programs as
major programs than the number of Type A programs.
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(f) Percentage of coverage rule. If the auditee meets the criteria in § 200.520, the auditor need only audit the
major programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal
programs with Federal awards expended that, in aggregate, all major programs encompass at least 20
percent (0.20) of total Federal awards expended. Otherwise, the auditor must audit the major programs
identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal programs with
Federal awards expended that, in aggregate, all major programs encompass at least 40 percent (0.40) of
total Federal awards expended.
(g) Documentation of risk. The auditor must include in the audit documentation the risk analysis process
used in determining major programs.
(h) Auditor's judgment. When the major program determination was performed and documented in
accordance with this Subpart, the auditor's judgment in applying the risk-based approach to determine
major programs must be presumed correct. Challenges by Federal agencies and pass-through entities
must only be for clearly improper use of the requirements in this part. However, Federal agencies and
pass-through entities may provide auditors guidance about the risk of a particular Federal program and
the auditor must consider this guidance in determining major programs in audits not yet completed.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, 2020]

§ 200.519 Criteria for Federal program risk.
(a) General. The auditor's determination should be based on an overall evaluation of the risk of
noncompliance occurring that could be material to the Federal program. The auditor must consider
criteria, such as described in paragraphs (b), (c), and (d) of this section, to identify risk in Federal
programs. Also, as part of the risk analysis, the auditor may wish to discuss a particular Federal program
with auditee management and the Federal agency or pass-through entity.
(b) Current and prior audit experience.
(1) Weaknesses in internal control over Federal programs would indicate higher risk. Consideration
should be given to the control environment over Federal programs and such factors as the
expectation of management's adherence to Federal statutes, regulations, and the terms and
conditions of Federal awards and the competence and experience of personnel who administer the
Federal programs.
(i)

A Federal program administered under multiple internal control structures may have higher risk.
When assessing risk in a large single audit, the auditor must consider whether weaknesses are
isolated in a single operating unit (e.g., one college campus) or pervasive throughout the entity.

(ii) When significant parts of a Federal program are passed through to subrecipients, a weak
system for monitoring subrecipients would indicate higher risk.
(2) Prior audit findings would indicate higher risk, particularly when the situations identified in the audit
findings could have a significant impact on a Federal program or have not been corrected.
(3) Federal programs not recently audited as major programs may be of higher risk than Federal
programs recently audited as major programs without audit findings.
(c) Oversight exercised by Federal agencies and pass-through entities.

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(1) Oversight exercised by Federal agencies or pass-through entities could be used to assess risk. For
example, recent monitoring or other reviews performed by an oversight entity that disclosed no
significant problems would indicate lower risk, whereas monitoring that disclosed significant
problems would indicate higher risk.
(2) Federal agencies, with the concurrence of OMB, may identify Federal programs that are higher risk.
OMB will provide this identification in the compliance supplement.
(d) Inherent risk of the Federal program.
(1) The nature of a Federal program may indicate risk. Consideration should be given to the complexity
of the program and the extent to which the Federal program contracts for goods and services. For
example, Federal programs that disburse funds through third-party contracts or have eligibility
criteria may be of higher risk. Federal programs primarily involving staff payroll costs may have high
risk for noncompliance with requirements of § 200.430, but otherwise be at low risk.
(2) The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example,
a new Federal program with new or interim regulations may have higher risk than an established
program with time-tested regulations. Also, significant changes in Federal programs, statutes,
regulations, or the terms and conditions of Federal awards may increase risk.
(3) The phase of a Federal program in its life cycle at the auditee may indicate risk. For example, during
the first and last years that an auditee participates in a Federal program, the risk may be higher due
to start-up or closeout of program activities and staff.
(4) Type B programs with larger Federal awards expended would be of higher risk than programs with
substantially smaller Federal awards expended.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

§ 200.520 Criteria for a low-risk auditee.
An auditee that meets all of the following conditions for each of the preceding two audit periods must qualify as a
low-risk auditee and be eligible for reduced audit coverage in accordance with § 200.518.
(a) Single audits were performed on an annual basis in accordance with the provisions of this Subpart,
including submitting the data collection form and the reporting package to the FAC within the timeframe
specified in § 200.512. A non-Federal entity that has biennial audits does not qualify as a low-risk auditee.
(b) The auditor's opinion on whether the financial statements were prepared in accordance with GAAP, or a
basis of accounting required by state law, and the auditor's in relation to opinion on the schedule of
expenditures of Federal awards were unmodified.
(c) There were no deficiencies in internal control which were identified as material weaknesses under the
requirements of GAGAS.
(d) The auditor did not report a substantial doubt about the auditee's ability to continue as a going concern.
(e) None of the Federal programs had audit findings from any of the following in either of the preceding two
audit periods in which they were classified as Type A programs:
(1) Internal control deficiencies that were identified as material weaknesses in the auditor's report on
internal control for major programs as required under § 200.515(c);
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(2) A modified opinion on a major program in the auditor's report on major programs as required under §
200.515(c); or
(3) Known or likely questioned costs that exceeded five percent of the total Federal awards expended for
a Type A program during the audit period.
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

MANAGEMENT DECISIONS
§ 200.521 Management decision.
(a) General. The management decision must clearly state whether or not the audit finding is sustained, the
reasons for the decision, and the expected auditee action to repay disallowed costs, make financial
adjustments, or take other action. If the auditee has not completed corrective action, a timetable for
follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through
entity may request additional information or documentation from the auditee, including a request for
auditor assurance related to the documentation, as a way of mitigating disallowed costs. The
management decision should describe any appeal process available to the auditee. While not required,
the Federal agency or pass-through entity may also issue a management decision on findings relating to
the financial statements which are required to be reported in accordance with GAGAS.
(b) Federal agency. As provided in § 200.513(a)(3)(vii), the cognizant agency for audit must be responsible for
coordinating a management decision for audit findings that affect the programs of more than one Federal
agency. As provided in § 200.513(c)(3)(i), a Federal awarding agency is responsible for issuing a
management decision for findings that relate to Federal awards it makes to non-Federal entities.
(c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a
management decision for audit findings that relate to Federal awards it makes to subrecipients.
(d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a
management decision must do so within six months of acceptance of the audit report by the FAC. The
auditee must initiate and proceed with corrective action as rapidly as possible and corrective action
should begin no later than upon receipt of the audit report.
(e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to
each audit finding in accordance with § 200.516(c).
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49575, Aug. 13, 2020]

Appendix I to Part 200—Full Text of Notice of Funding Opportunity
The full text of the notice of funding opportunity is organized in sections. The required format outlined in this
appendix indicates immediately following the title of each section whether that section is required in every
announcement or is a Federal awarding agency option. The format is designed so that similar types of information
will appear in the same sections in announcements of different Federal funding opportunities. Toward that end,
there is text in each of the following sections to describe the types of information that a Federal awarding agency
would include in that section of an actual announcement.

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A Federal awarding agency that wishes to include information that the format does not specifically discuss may
address that subject in whatever section(s) is most appropriate. For example, if a Federal awarding agency chooses
to address performance goals in the announcement, it might do so in the funding opportunity description, the
application content, or the reporting requirements.
Similarly, when this format calls for a type of information to be in a particular section, a Federal awarding agency
wishing to address that subject in other sections may elect to repeat the information in those sections or use cross
references between the sections (there should be hyperlinks for cross-references in any electronic versions of the
announcement). For example, a Federal awarding agency may want to include Section A information about the
types of non-Federal entities who are eligible to apply. The format specifies a standard location for that information
in Section C.1 but does not preclude repeating the information in Section A or creating a cross reference between
Section A and C.1, as long as a potential applicant can find the information quickly and easily from the standard
location.
The sections of the full text of the announcement are described in the following paragraphs.

A. Program Description—Required
This section contains the full program description of the funding opportunity. It may be as long as needed
to adequately communicate to potential applicants the areas in which funding may be provided. It
describes the Federal awarding agency's funding priorities or the technical or focus areas in which the
Federal awarding agency intends to provide assistance. As appropriate, it may include any program
history (e.g., whether this is a new program or a new or changed area of program emphasis). This section
must include program goals and objectives, a reference to the relevant Assistance Listings, a description
of how the award will contribute to the achievement of the program's goals and objectives, and the
expected performance goals, indicators, targets, baseline data, data collection, and other outcomes such
Federal awarding agency expects to achieve, and may include examples of successful projects that have
been funded previously. This section also may include other information the Federal awarding agency
deems necessary, and must at a minimum include citations for authorizing statutes and regulations for
the funding opportunity.

B. Federal Award Information—Required
This section provides sufficient information to help an applicant make an informed decision about
whether to submit a proposal. Relevant information could include the total amount of funding that the
Federal awarding agency expects to award through the announcement; the expected performance
indicators, targets, baseline data, and data collection; the anticipated number of Federal awards; the
expected amounts of individual Federal awards (which may be a range); the amount of funding per
Federal award, on average, experienced in previous years; and the anticipated start dates and periods of
performance for new Federal awards. This section also should address whether applications for renewal
or supplementation of existing projects are eligible to compete with applications for new Federal awards.
This section also must indicate the type(s) of assistance instrument (e.g., grant, cooperative agreement)
that may be awarded if applications are successful. If cooperative agreements may be awarded, this
section either should describe the “substantial involvement” that the Federal awarding agency expects to

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have or should reference where the potential applicant can find that information (e.g., in the funding
opportunity description in Section A. or Federal award administration information in Section D. If
procurement contracts also may be awarded, this must be stated.

C. Eligibility Information
This section addresses the considerations or factors that determine applicant or application eligibility.
This includes the eligibility of particular types of applicant organizations, any factors affecting the
eligibility of the principal investigator or project director, and any criteria that make particular projects
ineligible. Federal agencies should make clear whether an applicant's failure to meet an eligibility criterion
by the time of an application deadline will result in the Federal awarding agency returning the application
without review or, even though an application may be reviewed, will preclude the Federal awarding agency
from making a Federal award. Key elements to be addressed are:
1.

Eligible Applicants—Required. Announcements must clearly identify the types of entities that are
eligible to apply. If there are no restrictions on eligibility, this section may simply indicate that all
potential applicants are eligible. If there are restrictions on eligibility, it is important to be clear about
the specific types of entities that are eligible, not just the types that are ineligible. For example, if the
program is limited to nonprofit organizations subject to 26 U.S.C. 501(c)(3) of the tax code (26 U.S.C.
501(c)(3)), the announcement should say so. Similarly, it is better to state explicitly that Native
American tribal organizations are eligible than to assume that they can unambiguously infer that
from a statement that nonprofit organizations may apply. Eligibility also can be expressed by
exception, (e.g., open to all types of domestic applicants other than individuals). This section should
refer to any portion of Section D specifying documentation that must be submitted to support an
eligibility determination (e.g., proof of 501(c)(3) status as determined by the Internal Revenue
Service or an authorizing tribal resolution). To the extent that any funding restriction in Section D.6
could affect the eligibility of an applicant or project, the announcement must either restate that
restriction in this section or provide a cross-reference to its description in Section D.6.

2.

Cost Sharing or Matching—Required. Announcements must state whether there is required cost
sharing, matching, or cost participation without which an application would be ineligible (if cost
sharing is not required, the announcement must explicitly say so). Required cost sharing may be a
certain percentage or amount, or may be in the form of contributions of specified items or activities
(e.g., provision of equipment). It is important that the announcement be clear about any restrictions
on the types of cost (e.g., in-kind contributions) that are acceptable as cost sharing. Cost sharing as
an eligibility criterion includes requirements based in statute or regulation, as described in § 200.306
of this Part. This section should refer to the appropriate portion(s) of section D. stating any preaward requirements for submission of letters or other documentation to verify commitments to
meet cost-sharing requirements if a Federal award is made.

3.

Other—Required, if applicable. If there are other eligibility criteria (i.e., criteria that have the effect of
making an application or project ineligible for Federal awards, whether referred to as
“responsiveness” criteria, “go-no go” criteria, “threshold” criteria, or in other ways), must be clearly
stated and must include a reference to the regulation of requirement that describes the restriction,
as applicable. For example, if entities that have been found to be in violation of a particular Federal
statute are ineligible, it is important to say so. This section must also state any limit on the number
of applications an applicant may submit under the announcement and make clear whether the

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limitation is on the submitting organization, individual investigator/program director, or both. This
section should also address any eligibility criteria for beneficiaries or for program participants other
than Federal award recipients.

D. Application and Submission Information
1.

Address to Request Application Package—Required. Potential applicants must be told how to get
application forms, kits, or other materials needed to apply (if this announcement contains everything
needed, this section need only say so). An Internet address where the materials can be accessed is
acceptable. However, since high-speed Internet access is not yet universally available for
downloading documents, and applicants may have additional accessibility requirements, there also
should be a way for potential applicants to request paper copies of materials, such as a U.S. Postal
Service mailing address, telephone or FAX number, Telephone Device for the Deaf (TDD), Text
Telephone (TTY) number, and/or Federal Information Relay Service (FIRS) number.

2.

Content and Form of Application Submission—Required. This section must identify the required
content of an application and the forms or formats that an applicant must use to submit it. If any
requirements are stated elsewhere because they are general requirements that apply to multiple
programs or funding opportunities, this section should refer to where those requirements may be
found. This section also should include required forms or formats as part of the announcement or
state where the applicant may obtain them.
This section should specifically address content and form or format requirements for:

3.

i.

Pre-applications, letters of intent, or white papers required or encouraged (see Section D.4),
including any limitations on the number of pages or other formatting requirements similar to
those for full applications.

ii.

The application as a whole. For all submissions, this would include any limitations on the
number of pages, font size and typeface, margins, paper size, number of copies, and sequence
or assembly requirements. If electronic submission is permitted or required, this could include
special requirements for formatting or signatures.

iii.

Component pieces of the application (e.g., if all copies of the application must bear original
signatures on the face page or the program narrative may not exceed 10 pages). This includes
any pieces that may be submitted separately by third parties (e.g., references or letters
confirming commitments from third parties that will be contributing a portion of any required
cost sharing).

iv.

Information that successful applicants must submit after notification of intent to make a
Federal award, but prior to a Federal award. This could include evidence of compliance with
requirements relating to human subjects or information needed to comply with the National
Environmental Policy Act (NEPA) (42 U.S.C. 4321–4370h).

Unique entity identifier and System for Award Management (SAM) — Required. This paragraph must
state clearly that each applicant (unless the applicant is an individual or Federal awarding agency
that is excepted from those requirements under 2 CFR 25.110(b) or (c), or has an exception
approved by the Federal awarding agency under 2 CFR 25.110(d)) is required to:
(i)

Be registered in SAM before submitting its application;

(ii) Provide a valid unique entity identifier in its application; and
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(iii) Continue to maintain an active SAM registration with current information at all times during
which it has an active Federal award or an application or plan under consideration by a Federal
awarding agency. It also must state that the Federal awarding agency may not make a Federal
award to an applicant until the applicant has complied with all applicable unique entity identifier
and SAM requirements and, if an applicant has not fully complied with the requirements by the
time the Federal awarding agency is ready to make a Federal award, the Federal awarding
agency may determine that the applicant is not qualified to receive a Federal award and use
that determination as a basis for making a Federal award to another applicant.
4.

Submission Dates and Times—Required. Announcements must identify due dates and times for all
submissions. This includes not only the full applications but also any preliminary submissions (e.g.,
letters of intent, white papers, or pre-applications). It also includes any other submissions of
information before Federal award that are separate from the full application. If the funding
opportunity is a general announcement that is open for a period of time with no specific due dates
for applications, this section should say so. Note that the information on dates that is included in
this section also must appear with other overview information in a location preceding the full text of
the announcement (see § 200.204 of this part).

5.

Intergovernmental Review—Required, if applicable. If the funding opportunity is subject to Executive
Order 12372, “Intergovernmental Review of Federal Programs,” the notice must say so and
applicants must contact their state's Single Point of Contact (SPOC) to find out about and comply
with the state's process under Executive Order 12372, it may be useful to inform potential applicants
that the names and addresses of the SPOCs are listed in the Office of Management and Budget's
website.

6.

Funding Restrictions—Required. Notices must include information on funding restrictions in order to
allow an applicant to develop an application and budget consistent with program requirements.
Examples are whether construction is an allowable activity, if there are any limitations on direct
costs such as foreign travel or equipment purchases, and if there are any limits on indirect costs (or
facilities and administrative costs). Applicants must be advised if Federal awards will not allow
reimbursement of pre-Federal award costs.

7.

Other Submission Requirements— Required. This section must address any other submission
requirements not included in the other paragraphs of this section. This might include the format of
submission, i.e., paper or electronic, for each type of required submission. Applicants should not be
required to submit in more than one format and this section should indicate whether they may
choose whether to submit applications in hard copy or electronically, may submit only in hard copy,
or may submit only electronically.
This section also must indicate where applications (and any pre-applications) must be submitted if
sent by postal mail, electronic means, or hand-delivery. For postal mail submission, this must include
the name of an office, official, individual or function (e.g., application receipt center) and a complete
mailing address. For electronic submission, this must include the URL or email address; whether a
password(s) is required; whether particular software or other electronic capabilities are required;
what to do in the event of system problems and a point of contact who will be available in the event
the applicant experiences technical difficulties.[1]

E. Application Review Information
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1.

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Criteria—Required. This section must address the criteria that the Federal awarding agency will use
to evaluate applications. This includes the merit and other review criteria that evaluators will use to
judge applications, including any statutory, regulatory, or other preferences (e.g., minority status or
Native American tribal preferences) that will be applied in the review process. These criteria are
distinct from eligibility criteria that are addressed before an application is accepted for review and
any program policy or other factors that are applied during the selection process, after the review
process is completed. The intent is to make the application process transparent so applicants can
make informed decisions when preparing their applications to maximize fairness of the process. The
announcement should clearly describe all criteria, including any sub-criteria. If criteria vary in
importance, the announcement should specify the relative percentages, weights, or other means
used to distinguish among them. For statutory, regulatory, or other preferences, the announcement
should provide a detailed explanation of those preferences with an explicit indication of their effect
(e.g., whether they result in additional points being assigned).
If an applicant's proposed cost sharing will be considered in the review process (as opposed to being
an eligibility criterion described in Section C.2), the announcement must specifically address how it
will be considered (e.g., to assign a certain number of additional points to applicants who offer cost
sharing, or to break ties among applications with equivalent scores after evaluation against all other
factors). If cost sharing will not be considered in the evaluation, the announcement should say so, so
that there is no ambiguity for potential applicants. Vague statements that cost sharing is
encouraged, without clarification as to what that means, are unhelpful to applicants. It also is
important that the announcement be clear about any restrictions on the types of cost (e.g., in-kind
contributions) that are acceptable as cost sharing.

2.

Review and Selection Process—Required. This section may vary in the level of detail provided. The
announcement must list any program policy or other factors or elements, other than merit criteria,
that the selecting official may use in selecting applications for Federal award (e.g., geographical
dispersion, program balance, or diversity). The Federal awarding agency may also include other
appropriate details. For example, this section may indicate who is responsible for evaluation against
the merit criteria (e.g., peers external to the Federal awarding agency or Federal awarding agency
personnel) and/or who makes the final selections for Federal awards. If there is a multi-phase review
process (e.g., an external panel advising internal Federal awarding agency personnel who make final
recommendations to the deciding official), the announcement may describe the phases. It also may
include: the number of people on an evaluation panel and how it operates, the way reviewers are
selected, reviewer qualifications, and the way that conflicts of interest are avoided. With respect to
electronic methods for providing information about funding opportunities or accepting applicants'
submissions of information, each Federal awarding agency is responsible for compliance with
Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d).
In addition, if the Federal awarding agency permits applicants to nominate suggested reviewers of
their applications or suggest those they feel may be inappropriate due to a conflict of interest, that
information should be included in this section.

[1]

With respect to electronic methods for providing information about funding opportunities or accepting
applicants' submissions of information, each Federal awarding agency is responsible for compliance with
Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d).
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3.

4.

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For any Federal award under a notice of funding opportunity, if the Federal awarding agency
anticipates that the total Federal share will be greater than the simplified acquisition threshold on
any Federal award under a notice of funding opportunity may include, over the period of
performance, this section must also inform applicants:
i.

That the Federal awarding agency, prior to making a Federal award with a total amount of
Federal share greater than the simplified acquisition threshold, is required to review and
consider any information about the applicant that is in the designated integrity and
performance system accessible through SAM (currently FAPIIS) (see 41 U.S.C. 2313);

ii.

That an applicant, at its option, may review information in the designated integrity and
performance systems accessible through SAM and comment on any information about itself
that a Federal awarding agency previously entered and is currently in the designated integrity
and performance system accessible through SAM;

iii.

That the Federal awarding agency will consider any comments by the applicant, in addition to
the other information in the designated integrity and performance system, in making a
judgment about the applicant's integrity, business ethics, and record of performance under
Federal awards when completing the review of risk posed by applicants as described in §
200.206.

Anticipated Announcement and Federal Award Dates—Optional. This section is intended to provide
applicants with information they can use for planning purposes. If there is a single application
deadline followed by the simultaneous review of all applications, the Federal awarding agency can
include in this section information about the anticipated dates for announcing or notifying
successful and unsuccessful applicants and for having Federal awards in place. If applications are
received and evaluated on a “rolling” basis at different times during an extended period, it may be
appropriate to give applicants an estimate of the time needed to process an application and notify
the applicant of the Federal awarding agency's decision.

F. Federal Award Administration Information
1.

Federal Award Notices—Required. This section must address what a successful applicant can expect
to receive following selection. If the Federal awarding agency's practice is to provide a separate
notice stating that an application has been selected before it actually makes the Federal award, this
section would be the place to indicate that the letter is not an authorization to begin performance (to
the extent that it allows charging to Federal awards of pre-award costs at the non-Federal entity's
own risk). This section should indicate that the notice of Federal award signed by the grants officer
(or equivalent) is the authorizing document, and whether it is provided through postal mail or by
electronic means and to whom. It also may address the timing, form, and content of notifications to
unsuccessful applicants. See also § 200.211.

2.

Administrative and National Policy Requirements—Required. This section must identify the usual
administrative and national policy requirements the Federal awarding agency's Federal awards may
include. Providing this information lets a potential applicant identify any requirements with which it
would have difficulty complying if its application is successful. In those cases, early notification
about the requirements allows the potential applicant to decide not to apply or to take needed
actions before receiving the Federal award. The announcement need not include all of the terms and
conditions of the Federal award, but may refer to a document (with information about how to obtain
it) or Internet site where applicants can see the terms and conditions. If this funding opportunity will

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lead to Federal awards with some special terms and conditions that differ from the Federal awarding
agency's usual (sometimes called “general”) terms and conditions, this section should highlight
those special terms and conditions. Doing so will alert applicants that have received Federal awards
from the Federal awarding agency previously and might not otherwise expect different terms and
conditions. For the same reason, the announcement should inform potential applicants about
special requirements that could apply to particular Federal awards after the review of applications
and other information, based on the particular circumstances of the effort to be supported (e.g., if
human subjects were to be involved or if some situations may justify special terms on intellectual
property, data sharing or security requirements).
3.

Reporting—Required. This section must include general information about the type (e.g., financial or
performance), frequency, and means of submission (paper or electronic) of post-Federal award
reporting requirements. Highlight any special reporting requirements for Federal awards under this
funding opportunity that differ (e.g., by report type, frequency, form/format, or circumstances for
use) from what the Federal awarding agency's Federal awards usually require. Federal awarding
agencies must also describe in this section all relevant requirements such as those at 2 CFR
180.335 and 180.350.
If the Federal share of any Federal award may include more than $500,000 over the period of
performance, this section must inform potential applicants about the post award reporting
requirements reflected in appendix XII to this part.

G. Federal Awarding Agency Contact(s)—Required
The announcement must give potential applicants a point(s) of contact for answering questions or
helping with problems while the funding opportunity is open. The intent of this requirement is to be as
helpful as possible to potential applicants, so the Federal awarding agency should consider approaches
such as giving:
i.

Points of contact who may be reached in multiple ways (e.g., by telephone, FAX, and/or email, as well
as regular mail).

ii.

A fax or email address that multiple people access, so that someone will respond even if others are
unexpectedly absent during critical periods.

iii.

Different contacts for distinct kinds of help (e.g., one for questions of programmatic content and a
second for administrative questions).

H. Other Information—Optional
This section may include any additional information that will assist a potential applicant. For example, the
section might:
i.

Indicate whether this is a new program or a one-time initiative.

ii.

Mention related programs or other upcoming or ongoing Federal awarding agency funding
opportunities for similar activities.

iii.

Include current Internet addresses for Federal awarding agency Web sites that may be useful to an
applicant in understanding the program.

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iv.

Alert applicants to the need to identify proprietary information and inform them about the way the
Federal awarding agency will handle it.

v.

Include certain routine notices to applicants (e.g., that the Federal Government is not obligated to
make any Federal award as a result of the announcement or that only grants officers can bind the
Federal Government to the expenditure of funds).

[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 43310, July 22, 2015; 85 FR 49575, Aug. 13, 2020]

Appendix II to Part 200—Contract Provisions for Non-Federal Entity Contracts Under Federal
Awards
In addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the nonFederal entity under the Federal award must contain provisions covering the following, as applicable.
(A) Contracts for more than the simplified acquisition threshold, which is the inflation adjusted amount
determined by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council
(Councils) as authorized by 41 U.S.C. 1908, must address administrative, contractual, or legal remedies in
instances where contractors violate or breach contract terms, and provide for such sanctions and
penalties as appropriate.
(B) All contracts in excess of $10,000 must address termination for cause and for convenience by the nonFederal entity including the manner by which it will be effected and the basis for settlement.
(C) Equal Employment Opportunity. Except as otherwise provided under 41 CFR Part 60, all contracts that
meet the definition of “federally assisted construction contract” in 41 CFR Part 60–1.3 must include the
equal opportunity clause provided under 41 CFR 60–1.4(b), in accordance with Executive Order 11246,
“Equal Employment Opportunity” (30 FR 12319, 12935, 3 CFR Part, 1964–1965 Comp., p. 339), as
amended by Executive Order 11375, “Amending Executive Order 11246 Relating to Equal Employment
Opportunity,” and implementing regulations at 41 CFR part 60, “Office of Federal Contract Compliance
Programs, Equal Employment Opportunity, Department of Labor.”
(D) Davis-Bacon Act, as amended (40 U.S.C. 3141–3148). When required by Federal program legislation, all
prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a
provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141–3144, and 3146–3148) as
supplemented by Department of Labor regulations (29 CFR Part 5, “Labor Standards Provisions
Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the
statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the
prevailing wages specified in a wage determination made by the Secretary of Labor. In addition,
contractors must be required to pay wages not less than once a week. The non-Federal entity must place
a copy of the current prevailing wage determination issued by the Department of Labor in each
solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of
the wage determination. The non-Federal entity must report all suspected or reported violations to the
Federal awarding agency. The contracts must also include a provision for compliance with the Copeland
“Anti-Kickback” Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR Part
3, “Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by
Loans or Grants from the United States”). The Act provides that each contractor or subrecipient must be

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prohibited from inducing, by any means, any person employed in the construction, completion, or repair of
public work, to give up any part of the compensation to which he or she is otherwise entitled. The nonFederal entity must report all suspected or reported violations to the Federal awarding agency.
(E) Contract Work Hours and Safety Standards Act (40 U.S.C. 3701–3708). Where applicable, all contracts
awarded by the non-Federal entity in excess of $100,000 that involve the employment of mechanics or
laborers must include a provision for compliance with 40 U.S.C. 3702 and 3704, as supplemented by
Department of Labor regulations (29 CFR Part 5). Under 40 U.S.C. 3702 of the Act, each contractor must
be required to compute the wages of every mechanic and laborer on the basis of a standard work week of
40 hours. Work in excess of the standard work week is permissible provided that the worker is
compensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in
excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to construction
work and provide that no laborer or mechanic must be required to work in surroundings or under working
conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the
purchases of supplies or materials or articles ordinarily available on the open market, or contracts for
transportation or transmission of intelligence.
(F) Rights to Inventions Made Under a Contract or Agreement. If the Federal award meets the definition of
“funding agreement” under 37 CFR § 401.2 (a) and the recipient or subrecipient wishes to enter into a
contract with a small business firm or nonprofit organization regarding the substitution of parties,
assignment or performance of experimental, developmental, or research work under that “funding
agreement,” the recipient or subrecipient must comply with the requirements of 37 CFR Part 401, “Rights
to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants,
Contracts and Cooperative Agreements,” and any implementing regulations issued by the awarding
agency.
(G) Clean Air Act (42 U.S.C. 7401–7671q.) and the Federal Water Pollution Control Act (33 U.S.C. 1251–1387),
as amended—Contracts and subgrants of amounts in excess of $150,000 must contain a provision that
requires the non-Federal award to agree to comply with all applicable standards, orders or regulations
issued pursuant to the Clean Air Act (42 U.S.C. 7401–7671q) and the Federal Water Pollution Control Act
as amended (33 U.S.C. 1251–1387). Violations must be reported to the Federal awarding agency and the
Regional Office of the Environmental Protection Agency (EPA).
(H) Debarment and Suspension (Executive Orders 12549 and 12689)—A contract award (see 2 CFR 180.220)
must not be made to parties listed on the governmentwide exclusions in the System for Award
Management (SAM), in accordance with the OMB guidelines at 2 CFR 180 that implement Executive
Orders 12549 (3 CFR part 1986 Comp., p. 189) and 12689 (3 CFR part 1989 Comp., p. 235), “Debarment
and Suspension.” SAM Exclusions contains the names of parties debarred, suspended, or otherwise
excluded by agencies, as well as parties declared ineligible under statutory or regulatory authority other
than Executive Order 12549.
(I)

Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)—Contractors that apply or bid for an award exceeding
$100,000 must file the required certification. Each tier certifies to the tier above that it will not and has not
used Federal appropriated funds to pay any person or organization for influencing or attempting to
influence an officer or employee of any agency, a member of Congress, officer or employee of Congress,
or an employee of a member of Congress in connection with obtaining any Federal contract, grant or any
other award covered by 31 U.S.C. 1352. Each tier must also disclose any lobbying with non-Federal funds
that takes place in connection with obtaining any Federal award. Such disclosures are forwarded from tier
to tier up to the non-Federal award.

(J) See § 200.323.
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(K) See § 200.216.
(L) See § 200.322.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 85 FR 49577, Aug. 13, 2020]

Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate
Determination for Institutions of Higher Education (IHEs)

A. General
This appendix provides criteria for identifying and computing indirect (or indirect (F&A)) rates at IHEs
(institutions). Indirect (F&A) costs are those that are incurred for common or joint objectives and
therefore cannot be identified readily and specifically with a particular sponsored project, an instructional
activity, or any other institutional activity. See subsection B.1 for a discussion of the components of
indirect (F&A) costs.

1. Major Functions of an Institution
Refers to instruction, organized research, other sponsored activities and other institutional activities
as defined in this section:
a.

Instruction means the teaching and training activities of an institution. Except for research
training as provided in subsection b, this term includes all teaching and training activities,
whether they are offered for credits toward a degree or certificate or on a non-credit basis, and
whether they are offered through regular academic departments or separate divisions, such as
a summer school division or an extension division. Also considered part of this major function
are departmental research, and, where agreed to, university research.
(1) Sponsored instruction and training means specific instructional or training activity
established by grant, contract, or cooperative agreement. For purposes of the cost
principles, this activity may be considered a major function even though an institution's
accounting treatment may include it in the instruction function.
(2) Departmental research means research, development and scholarly activities that are not
organized research and, consequently, are not separately budgeted and accounted for.
Departmental research, for purposes of this document, is not considered as a major
function, but as a part of the instruction function of the institution.
(3) Only mandatory cost sharing or cost sharing specifically committed in the project budget
must be included in the organized research base for computing the indirect (F&A) cost
rate or reflected in any allocation of indirect costs. Salary costs above statutory limits are
not considered cost sharing.

b.

Organized research means all research and development activities of an institution that are
separately budgeted and accounted for. It includes:

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(1) Sponsored research means all research and development activities that are sponsored by
Federal and non-Federal agencies and organizations. This term includes activities
involving the training of individuals in research techniques (commonly called research
training) where such activities utilize the same facilities as other research and
development activities and where such activities are not included in the instruction
function.
(2) University research means all research and development activities that are separately
budgeted and accounted for by the institution under an internal application of institutional
funds. University research, for purposes of this document, must be combined with
sponsored research under the function of organized research.
c.

Other sponsored activities means programs and projects financed by Federal and non-Federal
agencies and organizations which involve the performance of work other than instruction and
organized research. Examples of such programs and projects are health service projects and
community service programs. However, when any of these activities are undertaken by the
institution without outside support, they may be classified as other institutional activities.

d.

Other institutional activities means all activities of an institution except for instruction,
departmental research, organized research, and other sponsored activities, as defined in this
section; indirect (F&A) cost activities identified in this Appendix paragraph B, Identification and
assignment of indirect (F&A) costs; and specialized services facilities described in § 200.468 of
this part.

2. Criteria for Distribution
a.

Base period. A base period for distribution of indirect (F&A) costs is the period during which the
costs are incurred. The base period normally should coincide with the fiscal year established by
the institution, but in any event the base period should be so selected as to avoid inequities in
the distribution of costs.

b.

Need for cost groupings. The overall objective of the indirect (F&A) cost allocation process is to
distribute the indirect (F&A) costs described in Section B, Identification and assignment of
indirect (F&A) costs, to the major functions of the institution in proportions reasonably
consistent with the nature and extent of their use of the institution's resources. In order to
achieve this objective, it may be necessary to provide for selective distribution by establishing
separate groupings of cost within one or more of the indirect (F&A) cost categories referred to
in subsection B.1. In general, the cost groupings established within a category should
constitute, in each case, a pool of those items of expense that are considered to be of like
nature in terms of their relative contribution to (or degree of remoteness from) the particular
cost objectives to which distribution is appropriate. Cost groupings should be established
considering the general guides provided in subsection c of this section. Each such pool or cost
grouping should then be distributed individually to the related cost objectives, using the
distribution base or method most appropriate in light of the guidelines set forth in subsection d
of this section.

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c.

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General considerations on cost groupings. The extent to which separate cost groupings and
selective distribution would be appropriate at an institution is a matter of judgment to be
determined on a case-by-case basis. Typical situations which may warrant the establishment of
two or more separate cost groupings (based on account classification or analysis) within an
indirect (F&A) cost category include but are not limited to the following:
(1) If certain items or categories of expense relate solely to one of the major functions of the
institution or to less than all functions, such expenses should be set aside as a separate
cost grouping for direct assignment or selective allocation in accordance with the guides
provided in subsections b and d.
(2) If any types of expense ordinarily treated as general administration or departmental
administration are charged to Federal awards as direct costs, expenses applicable to
other activities of the institution when incurred for the same purposes in like
circumstances must, through separate cost groupings, be excluded from the indirect
(F&A) costs allocable to those Federal awards and included in the direct cost of other
activities for cost allocation purposes.
(3) If it is determined that certain expenses are for the support of a service unit or facility
whose output is susceptible of measurement on a workload or other quantitative basis,
such expenses should be set aside as a separate cost grouping for distribution on such
basis to organized research, instructional, and other activities at the institution or within
the department.
(4) If activities provide their own purchasing, personnel administration, building maintenance
or similar service, the distribution of general administration and general expenses, or
operation and maintenance expenses to such activities should be accomplished through
cost groupings which include only that portion of central indirect (F&A) costs (such as for
overall management) which are properly allocable to such activities.
(5) If the institution elects to treat fringe benefits as indirect (F&A) charges, such costs should
be set aside as a separate cost grouping for selective distribution to related cost
objectives.
(6) The number of separate cost groupings within a category should be held within practical
limits, after taking into consideration the materiality of the amounts involved and the
degree of precision attainable through less selective methods of distribution.

d.

Selection of distribution method.
(1) Actual conditions must be taken into account in selecting the method or base to be used
in distributing individual cost groupings. The essential consideration in selecting a base is
that it be the one best suited for assigning the pool of costs to cost objectives in
accordance with benefits derived; with a traceable cause-and-effect relationship; or with
logic and reason, where neither benefit nor a cause-and-effect relationship is
determinable.
(2) If a cost grouping can be identified directly with the cost objective benefitted, it should be
assigned to that cost objective.

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(3) If the expenses in a cost grouping are more general in nature, the distribution may be
based on a cost analysis study which results in an equitable distribution of the costs. Such
cost analysis studies may take into consideration weighting factors, population, or space
occupied if appropriate. Cost analysis studies, however, must
(a) be appropriately documented in sufficient detail for subsequent review by the
cognizant agency for indirect costs,
(b) distribute the costs to the related cost objectives in accordance with the relative
benefits derived,
(c) be statistically sound,
(d) be performed specifically at the institution at which the results are to be used, and
(e) be reviewed periodically, but not less frequently than rate negotiations, updated if
necessary, and used consistently. Any assumptions made in the study must be
stated and explained. The use of cost analysis studies and periodic changes in the
method of cost distribution must be fully justified.
(4) If a cost analysis study is not performed, or if the study does not result in an equitable
distribution of the costs, the distribution must be made in accordance with the appropriate
base cited in Section B, unless one of the following conditions is met:
(a) It can be demonstrated that the use of a different base would result in a more
equitable allocation of the costs, or that a more readily available base would not
increase the costs charged to Federal awards, or
(b) The institution qualifies for, and elects to use, the simplified method for computing
indirect (F&A) cost rates described in Section D.
(5) Notwithstanding subsection (3), effective July 1, 1998, a cost analysis or base other than
that in Section B must not be used to distribute utility or student services costs. Instead,
subsection B.4.c, may be used in the recovery of utility costs.
e.

Order of distribution.
(1) Indirect (F&A) costs are the broad categories of costs discussed in Section B.1.
(2) Depreciation, interest expenses, operation and maintenance expenses, and general
administrative and general expenses should be allocated in that order to the remaining
indirect (F&A) cost categories as well as to the major functions and specialized service
facilities of the institution. Other cost categories may be allocated in the order determined
to be most appropriate by the institutions. When cross allocation of costs is made as
provided in subsection (3), this order of allocation does not apply.
(3) Normally an indirect (F&A) cost category will be considered closed once it has been
allocated to other cost objectives, and costs may not be subsequently allocated to it.
However, a cross allocation of costs between two or more indirect (F&A) cost categories
may be used if such allocation will result in a more equitable allocation of costs. If a cross
allocation is used, an appropriate modification to the composition of the indirect (F&A)
cost categories described in Section B is required.

B. Identification and Assignment of Indirect (F&A) Costs
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1. Definition of Facilities and Administration
See § 200.414 which provides the basis for these indirect cost requirements.

2. Depreciation
a.

The expenses under this heading are the portion of the costs of the institution's buildings, capital
improvements to land and buildings, and equipment which are computed in accordance with §
200.436.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be allocated in the following manner:
(1) Depreciation on buildings used exclusively in the conduct of a single function, and on capital
improvements and equipment used in such buildings, must be assigned to that function.
(2) Depreciation on buildings used for more than one function, and on capital improvements and
equipment used in such buildings, must be allocated to the individual functions performed in
each building on the basis of usable square feet of space, excluding common areas such as
hallways, stairwells, and rest rooms.
(3) Depreciation on buildings, capital improvements and equipment related to space (e.g.,
individual rooms, laboratories) used jointly by more than one function (as determined by the
users of the space) must be treated as follows. The cost of each jointly used unit of space
must be allocated to benefitting functions on the basis of:
(a) The employee full-time equivalents (FTEs) or salaries and wages of those individual
functions benefitting from the use of that space; or
(b) Institution-wide employee FTEs or salaries and wages applicable to the benefitting major
functions (see Section A.1) of the institution.
(4) Depreciation on certain capital improvements to land, such as paved parking areas, fences,
sidewalks, and the like, not included in the cost of buildings, must be allocated to user
categories of students and employees on a full-time equivalent basis. The amount allocated to
the student category must be assigned to the instruction function of the institution. The
amount allocated to the employee category must be further allocated to the major functions of
the institution in proportion to the salaries and wages of all employees applicable to those
functions.

3. Interest
Interest on debt associated with certain buildings, equipment and capital improvements, as defined in §
200.449, must be classified as an expenditure under the category Facilities. These costs must be
allocated in the same manner as the depreciation on the buildings, equipment and capital improvements
to which the interest relates.

4. Operation and Maintenance Expenses

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a.

The expenses under this heading are those that have been incurred for the administration,
supervision, operation, maintenance, preservation, and protection of the institution's physical plant.
They include expenses normally incurred for such items as janitorial and utility services; repairs and
ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance
and operation of buildings and other plant facilities; security; earthquake and disaster preparedness;
environmental safety; hazardous waste disposal; property, liability and all other insurance relating to
property; space and capital leasing; facility planning and management; and central receiving. The
operation and maintenance expense category should also include its allocable share of fringe
benefit costs, depreciation, and interest costs.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be allocated in the same manner as described in subsection 2.b for depreciation.

c.

A utility cost adjustment of up to 1.3 percentage points may be included in the negotiated indirect
cost rate of the IHE for organized research, per the computation alternatives in paragraphs (c)(1) and
(2) of this section:
(1) Where space is devoted to a single function and metering allows unambiguous measurement
of usage related to that space, costs must be assigned to the function located in that space.
(2) Where space is allocated to different functions and metering does not allow unambiguous
measurement of usage by function, costs must be allocated as follows:
(i)

Utilities costs should be apportioned to functions in the same manner as depreciation,
based on the calculated difference between the site or building actual square footage for
monitored research laboratory space (site, building, floor, or room), and a separate
calculation prepared by the IHE using the “effective square footage” described in
subsection (c)(2)(ii) of this section.

(ii) “Effective square footage” allocated to research laboratory space must be calculated as
the actual square footage times the relative energy utilization index (REUI) posted on the
OMB Web site at the time of a rate determination.
A.

This index is the ratio of a laboratory energy use index (lab EUI) to the corresponding
index for overall average college or university space (college EUI).

B.

In July 2012, values for these two indices (taken respectively from the Lawrence
Berkeley Laboratory “Labs for the 21st Century” benchmarking tool and the US
Department of Energy “Buildings Energy Databook” and were 310 kBtu/sq ft-yr. and
155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain
currency, OMB will adjust the EUI numbers from time to time (no more often than
annually nor less often than every 5 years), using reliable and publicly disclosed data.
Current values of both the EUIs and the REUI will be posted on the OMB website.

5. General Administration and General Expenses
a.

The expenses under this heading are those that have been incurred for the general executive and
administrative offices of educational institutions and other expenses of a general character which do
not relate solely to any major function of the institution; i.e., solely to
(1) instruction,
(2) organized research,

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(3) other sponsored activities, or
(4) other institutional activities. The general administration and general expense category should
also include its allocable share of fringe benefit costs, operation and maintenance expense,
depreciation, and interest costs. Examples of general administration and general expenses
include: Those expenses incurred by administrative offices that serve the entire university
system of which the institution is a part; central offices of the institution such as the President's
or Chancellor's office, the offices for institution-wide financial management, business services,
budget and planning, personnel management, and safety and risk management; the office of
the General Counsel; and the operations of the central administrative management information
systems. General administration and general expenses must not include expenses incurred
within non-university-wide deans' offices, academic departments, organized research units, or
similar organizational units. (See subsection 6.)
b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be grouped first according to common major functions of the institution to which they
render services or provide benefits. The aggregate expenses of each group must then be allocated
to serviced or benefitted functions on the modified total cost basis. Modified total costs consist of
the same elements as those in Section C.2. When an activity included in this indirect (F&A) cost
category provides a service or product to another institution or organization, an appropriate
adjustment must be made to either the expenses or the basis of allocation or both, to assure a
proper allocation of costs.

6. Departmental Administration Expenses
a.

The expenses under this heading are those that have been incurred for administrative and supporting
services that benefit common or joint departmental activities or objectives in academic deans'
offices, academic departments and divisions, and organized research units. Organized research
units include such units as institutes, study centers, and research centers. Departmental
administration expenses are subject to the following limitations.
(1) Academic deans' offices. Salaries and operating expenses are limited to those attributable to
administrative functions.
(2) Academic departments:
(a) Salaries and fringe benefits attributable to the administrative work (including bid and
proposal preparation) of faculty (including department heads) and other professional
personnel conducting research and/or instruction, must be allowed at a rate of 3.6 percent
of modified total direct costs. This category does not include professional business or
professional administrative officers. This allowance must be added to the computation of
the indirect (F&A) cost rate for major functions in Section C; the expenses covered by the
allowance must be excluded from the departmental administration cost pool. No
documentation is required to support this allowance.
(b) Other administrative and supporting expenses incurred within academic departments are
allowable provided they are treated consistently in like circumstances. This would include
expenses such as the salaries of secretarial and clerical staffs, the salaries of
administrative officers and assistants, travel, office supplies, stockrooms, and the like.

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(3) Other fringe benefit costs applicable to the salaries and wages included in subsections (1) and
(2) are allowable, as well as an appropriate share of general administration and general
expenses, operation and maintenance expenses, and depreciation.
(4) Federal agencies may authorize reimbursement of additional costs for department heads and
faculty only in exceptional cases where an institution can demonstrate undue hardship or
detriment to project performance.
b.

The following guidelines apply to the determination of departmental administrative costs as direct or
indirect (F&A) costs.
(1) In developing the departmental administration cost pool, special care should be exercised to
ensure that costs incurred for the same purpose in like circumstances are treated consistently
as either direct or indirect (F&A) costs. For example, salaries of technical staff, laboratory
supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs,
travel costs, and specialized shop costs must be treated as direct costs wherever identifiable to
a particular cost objective. Direct charging of these costs may be accomplished through
specific identification of individual costs to benefitting cost objectives, or through recharge
centers or specialized service facilities, as appropriate under the circumstances. See §§
200.413(c) and 200.468.
(2) Items such as office supplies, postage, local telephone costs, and memberships must normally
be treated as indirect (F&A) costs.

c.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be allocated as follows:
(1) The administrative expenses of the dean's office of each college and school must be allocated
to the academic departments within that college or school on the modified total cost basis.
(2) The administrative expenses of each academic department, and the department's share of the
expenses allocated in subsection (1) must be allocated to the appropriate functions of the
department on the modified total cost basis.

7. Sponsored Projects Administration
a.

The expenses under this heading are limited to those incurred by a separate organization(s)
established primarily to administer sponsored projects, including such functions as grant and
contract administration (Federal and non-Federal), special security, purchasing, personnel,
administration, and editing and publishing of research and other reports. They include the salaries
and expenses of the head of such organization, assistants, and immediate staff, together with the
salaries and expenses of personnel engaged in supporting activities maintained by the organization,
such as stock rooms, print shops, and the like. This category also includes an allocable share of
fringe benefit costs, general administration and general expenses, operation and maintenance
expenses, and depreciation. Appropriate adjustments will be made for services provided to other
functions or organizations.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be allocated to the major functions of the institution under which the sponsored
projects are conducted on the basis of the modified total cost of sponsored projects.

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c.

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An appropriate adjustment must be made to eliminate any duplicate charges to Federal awards when
this category includes similar or identical activities as those included in the general administration
and general expense category or other indirect (F&A) cost items, such as accounting, procurement,
or personnel administration.

8. Library Expenses
a.

The expenses under this heading are those that have been incurred for the operation of the library,
including the cost of books and library materials purchased for the library, less any items of library
income that qualify as applicable credits under § 200.406. The library expense category should also
include the fringe benefits applicable to the salaries and wages included therein, an appropriate
share of general administration and general expense, operation and maintenance expense, and
depreciation. Costs incurred in the purchases of rare books (museum-type books) with no value to
Federal awards should not be allocated to them.

b.

In the absence of the alternatives provided for in Section A.2.d, the expenses included in this
category must be allocated first on the basis of primary categories of users, including students,
professional employees, and other users.
(1) The student category must consist of full-time equivalent students enrolled at the institution,
regardless of whether they earn credits toward a degree or certificate.
(2) The professional employee category must consist of all faculty members and other
professional employees of the institution, on a full-time equivalent basis. This category may
also include post-doctorate fellows and graduate students.
(3) The other users category must consist of a reasonable factor as determined by institutional
records to account for all other users of library facilities.

c.

Amount allocated in paragraph b of this section must be assigned further as follows:
(1) The amount in the student category must be assigned to the instruction function of the
institution.
(2) The amount in the professional employee category must be assigned to the major functions of
the institution in proportion to the salaries and wages of all faculty members and other
professional employees applicable to those functions.
(3) The amount in the other users category must be assigned to the other institutional activities
function of the institution.

9. Student Administration and Services
a.

The expenses under this heading are those that have been incurred for the administration of student
affairs and for services to students, including expenses of such activities as deans of students,
admissions, registrar, counseling and placement services, student advisers, student health and
infirmary services, catalogs, and commencements and convocations. The salaries of members of
the academic staff whose responsibilities to the institution require administrative work that benefits
sponsored projects may also be included to the extent that the portion charged to student
administration is determined in accordance with subpart E of this Part. This expense category also

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includes the fringe benefit costs applicable to the salaries and wages included therein, an
appropriate share of general administration and general expenses, operation and maintenance,
interest expense, and depreciation.
b.

In the absence of the alternatives provided for in Section A.2.d, the expenses in this category must
be allocated to the instruction function, and subsequently to Federal awards in that function.

10. Offset for Indirect (F&A) Expenses Otherwise Provided for by the Federal Government
a.

The items to be accumulated under this heading are the reimbursements and other payments from
the Federal Government which are made to the institution to support solely, specifically, and directly,
in whole or in part, any of the administrative or service activities described in subsections 2 through
9.

b.

The items in this group must be treated as a credit to the affected individual indirect (F&A) cost
category before that category is allocated to benefitting functions.

C. Determination and Application of Indirect (F&A) Cost Rate or Rates
1. Indirect (F&A) Cost Pools
a.
(1) Subject to subsection b, the separate categories of indirect (F&A) costs allocated to each major
function of the institution as prescribed in Section B, must be aggregated and treated as a
common pool for that function. The amount in each pool must be divided by the distribution
base described in subsection 2 to arrive at a single indirect (F&A) cost rate for each function.
(2) The rate for each function is used to distribute indirect (F&A) costs to individual Federal awards
of that function. Since a common pool is established for each major function of the institution,
a separate indirect (F&A) cost rate would be established for each of the major functions
described in Section A.1 under which Federal awards are carried out.
(3) Each institution's indirect (F&A) cost rate process must be appropriately designed to ensure that
Federal sponsors do not in any way subsidize the indirect (F&A) costs of other sponsors,
specifically activities sponsored by industry and foreign governments. Accordingly, each
allocation method used to identify and allocate the indirect (F&A) cost pools, as described in
Sections A.2 and B.2 through B.9, must contain the full amount of the institution's modified
total costs or other appropriate units of measurement used to make the computations. In
addition, the final rate distribution base (as defined in subsection 2) for each major function
(organized research, instruction, etc., as described in Section A.1 functions of an institution)
must contain all the programs or activities which utilize the indirect (F&A) costs allocated to
that major function. At the time an indirect (F&A) cost proposal is submitted to a cognizant
agency for indirect costs, each institution must describe the process it uses to ensure that
Federal funds are not used to subsidize industry and foreign government funded programs.

2. The Distribution Basis

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Indirect (F&A) costs must be distributed to applicable Federal awards and other benefitting activities
within each major function (see section A.1) on the basis of modified total direct costs (MTDC),
consisting of all salaries and wages, fringe benefits, materials and supplies, services, travel, and up to the
first $25,000 of each subaward (regardless of the period covered by the subaward). MTDC is defined in §
200.1. For this purpose, an indirect (F&A) cost rate should be determined for each of the separate indirect
(F&A) cost pools developed pursuant to subsection 1. The rate in each case should be stated as the
percentage which the amount of the particular indirect (F&A) cost pool is of the modified total direct
costs identified with such pool.

3. Negotiated Lump Sum for Indirect (F&A) Costs
A negotiated fixed amount in lieu of indirect (F&A) costs may be appropriate for self-contained, offcampus, or primarily subcontracted activities where the benefits derived from an institution's indirect
(F&A) services cannot be readily determined. Such negotiated indirect (F&A) costs will be treated as an
offset before allocation to instruction, organized research, other sponsored activities, and other
institutional activities. The base on which such remaining expenses are allocated should be appropriately
adjusted.

4. Predetermined Rates for Indirect (F&A) Costs
Public Law 87–638 (76 Stat. 437) as amended (41 U.S.C. 4708) authorizes the use of predetermined rates
in determining the “indirect costs” (indirect (F&A) costs) applicable under research agreements with
educational institutions. The stated objectives of the law are to simplify the administration of cost-type
research and development contracts (including grants) with educational institutions, to facilitate the
preparation of their budgets, and to permit more expeditious closeout of such contracts when the work is
completed. In view of the potential advantages offered by this procedure, negotiation of predetermined
rates for indirect (F&A) costs for a period of two to four years should be the norm in those situations
where the cost experience and other pertinent facts available are deemed sufficient to enable the parties
involved to reach an informed judgment as to the probable level of indirect (F&A) costs during the ensuing
accounting periods.

5. Negotiated Fixed Rates and Carry-Forward Provisions
When a fixed rate is negotiated in advance for a fiscal year (or other time period), the over- or underrecovery for that year may be included as an adjustment to the indirect (F&A) cost for the next rate
negotiation. When the rate is negotiated before the carry-forward adjustment is determined, the carryforward amount may be applied to the next subsequent rate negotiation. When such adjustments are to
be made, each fixed rate negotiated in advance for a given period will be computed by applying the
expected indirect (F&A) costs allocable to Federal awards for the forecast period plus or minus the carryforward adjustment (over- or under-recovery) from the prior period, to the forecast distribution base.
Unrecovered amounts under lump-sum agreements or cost-sharing provisions of prior years must not be
carried forward for consideration in the new rate negotiation. There must, however, be an advance
understanding in each case between the institution and the cognizant agency for indirect costs as to
whether these differences will be considered in the rate negotiation rather than making the determination
after the differences are known. Further, institutions electing to use this carry-forward provision may not
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subsequently change without prior approval of the cognizant agency for indirect costs. In the event that
an institution returns to a post-determined rate, any over- or under-recovery during the period in which
negotiated fixed rates and carry-forward provisions were followed will be included in the subsequent postdetermined rates. Where multiple rates are used, the same procedure will be applicable for determining
each rate.

6. Provisional and Final Rates for Indirect (F&A) Costs
Where the cognizant agency for indirect costs determines that cost experience and other pertinent facts
do not justify the use of predetermined rates, or a fixed rate with a carry-forward, or if the parties cannot
agree on an equitable rate, a provisional rate must be established. To prevent substantial overpayment or
underpayment, the provisional rate may be adjusted by the cognizant agency for indirect costs during the
institution's fiscal year. Predetermined or fixed rates may replace provisional rates at any time prior to the
close of the institution's fiscal year. If a provisional rate is not replaced by a predetermined or fixed rate
prior to the end of the institution's fiscal year, a final rate will be established and upward or downward
adjustments will be made based on the actual allowable costs incurred for the period involved.

7. Fixed Rates for the Life of the Sponsored Agreement
a.

Except as provided in paragraph (c)(1) of § 200.414, Federal agencies must use the negotiated rates
in effect at the time of the initial award throughout the life of the Federal award. Award levels for
Federal awards may not be adjusted in future years as a result of changes in negotiated rates.
“Negotiated rates” per the rate agreement include final, fixed, and predetermined rates and exclude
provisional rates. “Life” for the purpose of this subsection means each competitive segment of a
project. A competitive segment is a period of years approved by the Federal awarding agency at the
time of the Federal award. If negotiated rate agreements do not extend through the life of the Federal
award at the time of the initial award, then the negotiated rate for the last year of the Federal award
must be extended through the end of the life of the Federal award.

b.

Except as provided in § 200.414, when an educational institution does not have a negotiated rate
with the Federal Government at the time of an award (because the educational institution is a new
recipient or the parties cannot reach agreement on a rate), the provisional rate used at the time of
the award must be adjusted once a rate is negotiated and approved by the cognizant agency for
indirect costs.

8. Limitation on Reimbursement of Administrative Costs
a.

Notwithstanding the provisions of subsection C.1.a, the administrative costs charged to Federal
awards awarded or amended (including continuation and renewal awards) with effective dates
beginning on or after the start of the institution's first fiscal year which begins on or after October 1,
1991, must be limited to 26% of modified total direct costs (as defined in subsection 2) for the total
of General Administration and General Expenses, Departmental Administration, Sponsored Projects
Administration, and Student Administration and Services (including their allocable share of
depreciation, interest costs, operation and maintenance expenses, and fringe benefits costs, as
provided by Section B, and all other types of expenditures not listed specifically under one of the
subcategories of facilities in Section B.

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b.

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Institutions should not change their accounting or cost allocation methods if the effect is to change
the charging of a particular type of cost from F&A to direct, or to reclassify costs, or increase
allocations from the administrative pools identified in paragraph B.1 of this Appendix to the other
F&A cost pools or fringe benefits. Cognizant agencies for indirect cost are authorized to allow
changes where an institution's charging practices are at variance with acceptable practices followed
by a substantial majority of other institutions.

9. Alternative Method for Administrative Costs
a.

Notwithstanding the provisions of subsection C.1.a, an institution may elect to claim a fixed
allowance for the “Administration” portion of indirect (F&A) costs. The allowance could be either 24%
of modified total direct costs or a percentage equal to 95% of the most recently negotiated fixed or
predetermined rate for the cost pools included under “Administration” as defined in Section B.1,
whichever is less. Under this alternative, no cost proposal need be prepared for the “Administration”
portion of the indirect (F&A) cost rate nor is further identification or documentation of these costs
required (see subsection c). Where a negotiated indirect (F&A) cost agreement includes this
alternative, an institution must make no further charges for the expenditure categories described in
Section B.5, Section B.6, Section B.7, and Section B.9.

b.

In negotiations of rates for subsequent periods, an institution that has elected the option of
subsection a may continue to exercise it at the same rate without further identification or
documentation of costs.

c.

If an institution elects to accept a threshold rate as defined in subsection a of this section, it is not
required to perform a detailed analysis of its administrative costs. However, in order to compute the
facilities components of its indirect (F&A) cost rate, the institution must reconcile its indirect (F&A)
cost proposal to its financial statements and make appropriate adjustments and reclassifications to
identify the costs of each major function as defined in Section A.1, as well as to identify and allocate
the facilities components. Administrative costs that are not identified as such by the institution's
accounting system (such as those incurred in academic departments) will be classified as
instructional costs for purposes of reconciling indirect (F&A) cost proposals to financial statements
and allocating facilities costs.

10. Individual Rate Components
In order to provide mutually agreed-upon information for management purposes, each indirect (F&A) cost
rate negotiation or determination must include development of a rate for each indirect (F&A) cost pool as
well as the overall indirect (F&A) cost rate.

11. Negotiation and Approval of Indirect (F&A) Rate
a.

Cognizant agency for indirect costs is defined in Subpart A.
(1) Cost negotiation cognizance is assigned to the Department of Health and Human Services
(HHS) or the Department of Defense's Office of Naval Research (DOD), normally depending on
which of the two agencies (HHS or DOD) provides more funds directly to the educational
institution for the most recent three years. Information on funding must be derived from
relevant data gathered by the National Science Foundation. In cases where neither HHS nor
DOD provides Federal funding directly to an educational institution, the cognizant agency for

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indirect costs assignment must default to HHS. Notwithstanding the method for cognizance
determination described in this section, other arrangements for cognizance of a particular
educational institution may also be based in part on the types of research performed at the
educational institution and must be decided based on mutual agreement between HHS and
DOD. Where a non-Federal entity only receives funds as a subrecipient, see § 200.332.
(2) After cognizance is established, it must continue for a five-year period.
b.

Acceptance of rates. See § 200.414.

c.

Correcting deficiencies. The cognizant agency for indirect costs must negotiate changes needed to
correct systems deficiencies relating to accountability for Federal awards. Cognizant agencies for
indirect costs must address the concerns of other affected agencies, as appropriate, and must
negotiate special rates for Federal agencies that are required to limit recovery of indirect costs by
statute.

d.

Resolving questioned costs. The cognizant agency for indirect costs must conduct any necessary
negotiations with an educational institution regarding amounts questioned by audit that are due the
Federal Government related to costs covered by a negotiated agreement.

e.

Reimbursement. Reimbursement to cognizant agencies for indirect costs for work performed under
this Part may be made by reimbursement billing under the Economy Act, 31 U.S.C. 1535.

f.

Procedure for establishing facilities and administrative rates must be established by one of the
following methods:
(1) Formal negotiation. The cognizant agency for indirect costs is responsible for negotiating and
approving rates for an educational institution on behalf of all Federal agencies. Federal
awarding agencies that do not have cognizance for indirect costs must notify the cognizant
agency for indirect costs of specific concerns (i.e., a need to establish special cost rates) which
could affect the negotiation process. The cognizant agency for indirect costs must address the
concerns of all interested agencies, as appropriate. A pre-negotiation conference may be
scheduled among all interested agencies, if necessary. The cognizant agency for indirect costs
must then arrange a negotiation conference with the educational institution.
(2) Other than formal negotiation. The cognizant agency for indirect costs and educational
institution may reach an agreement on rates without a formal negotiation conference; for
example, through correspondence or use of the simplified method described in this section D of
this Appendix.

g.

Formalizing determinations and agreements. The cognizant agency for indirect costs must formalize
all determinations or agreements reached with an educational institution and provide copies to other
agencies having an interest. Determinations should include a description of any adjustments, the
actual amount, both dollar and percentage adjusted, and the reason for making adjustments.

h.

Disputes and disagreements. Where the cognizant agency for indirect costs is unable to reach
agreement with an educational institution with regard to rates or audit resolution, the appeal system
of the cognizant agency for indirect costs must be followed for resolution of the disagreement.

12. Standard Format for Submission

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For facilities and administrative (indirect (F&A)) rate proposals, educational institutions must use the
standard format, shown in section E of this appendix, to submit their indirect (F&A) rate proposal to the
cognizant agency for indirect costs. The cognizant agency for indirect costs may, on an institution-byinstitution basis, grant exceptions from all or portions of Part II of the standard format requirement. This
requirement does not apply to educational institutions that use the simplified method for calculating
indirect (F&A) rates, as described in Section D of this Appendix.
As provided in section C.10 of this appendix, each F&A cost rate negotiation or determination must
include development of a rate for each F&A cost pool as well as the overall F&A rate.

D. Simplified Method for Small Institutions
1. General
a.

Where the total direct cost of work covered by this Part at an institution does not exceed $10 million
in a fiscal year, the simplified procedure described in subsections 2 or 3 may be used in determining
allowable indirect (F&A) costs. Under this simplified procedure, the institution's most recent annual
financial report and immediately available supporting information must be utilized as a basis for
determining the indirect (F&A) cost rate applicable to all Federal awards. The institution may use
either the salaries and wages (see subsection 2) or modified total direct costs (see subsection 3) as
the distribution basis.

b.

The simplified procedure should not be used where it produces results which appear inequitable to
the Federal Government or the institution. In any such case, indirect (F&A) costs should be
determined through use of the regular procedure.

2. Simplified Procedure—Salaries and Wages Base
a.

Establish the total amount of salaries and wages paid to all employees of the institution.

b.

Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and
other costs specifically identified as unallowable) which customarily are classified under the
following titles or their equivalents:
(1) General administration and general expenses (exclusive of costs of student administration and
services, student activities, student aid, and scholarships).
(2) Operation and maintenance of physical plant and depreciation (after appropriate adjustment for
costs applicable to other institutional activities).
(3) Library.
(4) Department administration expenses, which will be computed as 20 percent of the salaries and
expenses of deans and heads of departments.
In those cases where expenditures classified under subsection (1) have previously been
allocated to other institutional activities, they may be included in the indirect (F&A) cost pool.
The total amount of salaries and wages included in the indirect (F&A) cost pool must be
separately identified.

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c.

Establish a salary and wage distribution base, determined by deducting from the total of salaries and
wages as established in subsection a from the amount of salaries and wages included under
subsection b.

d.

Establish the indirect (F&A) cost rate, determined by dividing the amount in the indirect (F&A) cost
pool, subsection b, by the amount of the distribution base, subsection c.

e.

Apply the indirect (F&A) cost rate to direct salaries and wages for individual agreements to
determine the amount of indirect (F&A) costs allocable to such agreements.

3. Simplified Procedure—Modified Total Direct Cost Base
a.

Establish the total costs incurred by the institution for the base period.

b.

Establish an indirect (F&A) cost pool consisting of the expenditures (exclusive of capital items and
other costs specifically identified as unallowable) which customarily are classified under the
following titles or their equivalents:
(1) General administration and general expenses (exclusive of costs of student administration and
services, student activities, student aid, and scholarships).
(2) Operation and maintenance of physical plant and depreciation (after appropriate adjustment for
costs applicable to other institutional activities).
(3) Library.
(4) Department administration expenses, which will be computed as 20 percent of the salaries and
expenses of deans and heads of departments. In those cases where expenditures classified
under subsection (1) have previously been allocated to other institutional activities, they may be
included in the indirect (F&A) cost pool. The modified total direct costs amount included in the
indirect (F&A) cost pool must be separately identified.

c.

Establish a modified total direct cost distribution base, as defined in Section C.2, The distribution
basis, that consists of all institution's direct functions.

d.

Establish the indirect (F&A) cost rate, determined by dividing the amount in the indirect (F&A) cost
pool, subsection b, by the amount of the distribution base, subsection c.

e.

Apply the indirect (F&A) cost rate to the modified total direct costs for individual agreements to
determine the amount of indirect (F&A) costs allocable to such agreements.

E. Documentation Requirements
The standard format for documentation requirements for indirect (indirect (F&A)) rate proposals for claiming costs
under the regular method is available on the OMB website.

F. Certification
1. Certification of Charges

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To assure that expenditures for Federal awards are proper and in accordance with the agreement
documents and approved project budgets, the annual and/or final fiscal reports or vouchers requesting
payment under the agreements will include a certification, signed by an authorized official of the
university, which reads “By signing this report, I certify to the best of my knowledge and belief that the
report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the
purposes and intent set forth in the award documents. I am aware that any false, fictitious, or fraudulent
information, or the omission of any material fact, may subject me to criminal, civil or administrative
penalties for fraud, false statements, false claims or otherwise. (U.S. Code, Title 18, Section 1001 and
Title 31, Sections 3729–3733 and 3801–3812)”.

2. Certification of Indirect (F&A) Costs
a.

Policy. Cognizant agencies must not accept a proposed indirect cost rate unless such costs have
been certified by the educational institution using the Certificate of indirect (F&A) Costs set forth in
subsection F.2.c

b.

The certificate must be signed on behalf of the institution by the chief financial officer or an
individual designated by an individual at a level no lower than vice president or chief financial officer.
An indirect (F&A) cost rate is not binding upon the Federal Government if the most recent required
proposal from the institution has not been certified. Where it is necessary to establish indirect (F&A)
cost rates, and the institution has not submitted a certified proposal for establishing such rates in
accordance with the requirements of this section, the Federal Government must unilaterally establish
such rates. Such rates may be based upon audited historical data or such other data that have been
furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all
unallowable costs have been excluded. When indirect (F&A) cost rates are unilaterally established by
the Federal Government because of failure of the institution to submit a certified proposal for
establishing such rates in accordance with this section, the rates established will be set at a level
low enough to ensure that potentially unallowable costs will not be reimbursed.

c.

Certificate. The certificate required by this section must be in the following form:

Certificate of Indirect (F&A) Costs
This is to certify that to the best of my knowledge and belief:
(1) I have reviewed the indirect (F&A) cost proposal submitted herewith;
(2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs
rate for [identify period covered by rate] are allowable in accordance with the requirements of
the Federal agreement(s) to which they apply and with the cost principles applicable to those
agreements.
(3) This proposal does not include any costs which are unallowable under subpart E of this part
such as (without limitation): Public relations costs, contributions and donations, entertainment
costs, fines and penalties, lobbying costs, and defense of fraud proceedings; and

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(4) All costs included in this proposal are properly allocable to Federal agreements on the basis of
a beneficial or causal relationship between the expenses incurred and the agreements to which
they are allocated in accordance with applicable requirements.
I declare that the foregoing is true and correct.
Institution of Higher Education:
Signature:
Name of Official:
Title:
Date of Execution:
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75888, Dec. 19, 2014; 80 FR 54409, Sept. 10, 2015; 85 FR 49577, Aug. 13,
2020]

Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate
Determination for Nonprofit Organizations

A. General
1.

Indirect costs are those that have been incurred for common or joint objectives and cannot be readily
identified with a particular final cost objective. Direct cost of minor amounts may be treated as
indirect costs under the conditions described in § 200.413(d). After direct costs have been
determined and assigned directly to awards or other work as appropriate, indirect costs are those
remaining to be allocated to benefitting cost objectives. A cost may not be allocated to a Federal
award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has
been assigned to a Federal award as a direct cost.

2.

“Major nonprofit organizations” are defined in paragraph (a) of § 200.414. See indirect cost rate
reporting requirements in sections B.2.e and B.3.g of this Appendix.

B. Allocation of Indirect Costs and Determination of Indirect Cost Rates
1. General
a.

If a nonprofit organization has only one major function, or where all its major functions benefit
from its indirect costs to approximately the same degree, the allocation of indirect costs and
the computation of an indirect cost rate may be accomplished through simplified allocation
procedures, as described in section B.2 of this Appendix.

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b.

If an organization has several major functions which benefit from its indirect costs in varying
degrees, allocation of indirect costs may require the accumulation of such costs into separate
cost groupings which then are allocated individually to benefitting functions by means of a
base which best measures the relative degree of benefit. The indirect costs allocated to each
function are then distributed to individual Federal awards and other activities included in that
function by means of an indirect cost rate(s).

c.

The determination of what constitutes an organization's major functions will depend on its
purpose in being; the types of services it renders to the public, its clients, and its members; and
the amount of effort it devotes to such activities as fundraising, public information and
membership activities.

d.

Specific methods for allocating indirect costs and computing indirect cost rates along with the
conditions under which each method should be used are described in section B.2 through B.5
of this Appendix.

e.

The base period for the allocation of indirect costs is the period in which such costs are
incurred and accumulated for allocation to work performed in that period. The base period
normally should coincide with the organization's fiscal year but, in any event, must be so
selected as to avoid inequities in the allocation of the costs.

2. Simplified Allocation Method
a.

Where an organization's major functions benefit from its indirect costs to approximately the
same degree, the allocation of indirect costs may be accomplished by
(i)

separating the organization's total costs for the base period as either direct or indirect, and

(ii) dividing the total allowable indirect costs (net of applicable credits) by an equitable
distribution base. The result of this process is an indirect cost rate which is used to
distribute indirect costs to individual Federal awards. The rate should be expressed as the
percentage which the total amount of allowable indirect costs bears to the base selected.
This method should also be used where an organization has only one major function
encompassing a number of individual projects or activities, and may be used where the
level of Federal awards to an organization is relatively small.
b.

Both the direct costs and the indirect costs must exclude capital expenditures and unallowable
costs. However, unallowable costs which represent activities must be included in the direct
costs under the conditions described in § 200.413(e).

c.

The distribution base may be total direct costs (excluding capital expenditures and other
distorting items, such as subawards for $25,000 or more), direct salaries and wages, or other
base which results in an equitable distribution. The distribution base must exclude participant
support costs as defined in § 200.1.

d.

Except where a special rate(s) is required in accordance with section B.5 of this Appendix, the
indirect cost rate developed under the above principles is applicable to all Federal awards of the
organization. If a special rate(s) is required, appropriate modifications must be made in order to
develop the special rate(s).

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e.

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For an organization that receives more than $10 million in direct Federal funding in a fiscal year,
a breakout of the indirect cost component into two broad categories, Facilities and
Administration as defined in paragraph (a) of § 200.414, is required. The rate in each case must
be stated as the percentage which the amount of the particular indirect cost category (i.e.,
Facilities or Administration) is of the distribution base identified with that category.

3. Multiple Allocation Base Method
a.

General. Where an organization's indirect costs benefit its major functions in varying degrees,
indirect costs must be accumulated into separate cost groupings, as described in
subparagraph b. Each grouping must then be allocated individually to benefitting functions by
means of a base which best measures the relative benefits. The default allocation bases by
cost pool are described in section B.3.c of this Appendix.

b.

Identification of indirect costs. Cost groupings must be established so as to permit the
allocation of each grouping on the basis of benefits provided to the major functions. Each
grouping must constitute a pool of expenses that are of like character in terms of functions
they benefit and in terms of the allocation base which best measures the relative benefits
provided to each function. The groupings are classified within the two broad categories:
“Facilities” and “Administration,” as described in section A.3 of this Appendix. The indirect cost
pools are defined as follows:
(1) Depreciation. The expenses under this heading are the portion of the costs of the
organization's buildings, capital improvements to land and buildings, and equipment which
are computed in accordance with § 200.436.
(2) Interest. Interest on debt associated with certain buildings, equipment and capital
improvements are computed in accordance with § 200.449.
(3) Operation and maintenance expenses. The expenses under this heading are those that
have been incurred for the administration, operation, maintenance, preservation, and
protection of the organization's physical plant. They include expenses normally incurred
for such items as: janitorial and utility services; repairs and ordinary or normal alterations
of buildings, furniture and equipment; care of grounds; maintenance and operation of
buildings and other plant facilities; security; earthquake and disaster preparedness;
environmental safety; hazardous waste disposal; property, liability and other insurance
relating to property; space and capital leasing; facility planning and management; and
central receiving. The operation and maintenance expenses category must also include its
allocable share of fringe benefit costs, depreciation, and interest costs.
(4) General administration and general expenses. The expenses under this heading are those
that have been incurred for the overall general executive and administrative offices of the
organization and other expenses of a general nature which do not relate solely to any
major function of the organization. This category must also include its allocable share of
fringe benefit costs, operation and maintenance expense, depreciation, and interest costs.
Examples of this category include central offices, such as the director's office, the office of
finance, business services, budget and planning, personnel, safety and risk management,
general counsel, management information systems, and library costs.

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In developing this cost pool, special care should be exercised to ensure that costs incurred
for the same purpose in like circumstances are treated consistently as either direct or
indirect costs. For example, salaries of technical staff, project supplies, project
publication, telephone toll charges, computer costs, travel costs, and specialized services
costs must be treated as direct costs wherever identifiable to a particular program. The
salaries and wages of administrative and pooled clerical staff should normally be treated
as indirect costs. Direct charging of these costs may be appropriate as described in §
200.413. Items such as office supplies, postage, local telephone costs, periodicals and
memberships should normally be treated as indirect costs.
c.

Allocation bases. Actual conditions must be taken into account in selecting the base to be used
in allocating the expenses in each grouping to benefitting functions. The essential
consideration in selecting a method or a base is that it is the one best suited for assigning the
pool of costs to cost objectives in accordance with benefits derived; a traceable cause and
effect relationship; or logic and reason, where neither the cause nor the effect of the
relationship is determinable. When an allocation can be made by assignment of a cost
grouping directly to the function benefitted, the allocation must be made in that manner. When
the expenses in a cost grouping are more general in nature, the allocation must be made
through the use of a selected base which produces results that are equitable to both the
Federal Government and the organization. The distribution must be made in accordance with
the bases described herein unless it can be demonstrated that the use of a different base
would result in a more equitable allocation of the costs, or that a more readily available base
would not increase the costs charged to Federal awards. The results of special cost studies
(such as an engineering utility study) must not be used to determine and allocate the indirect
costs to Federal awards.
(1) Depreciation. Depreciation expenses must be allocated in the following manner:
(a) Depreciation on buildings used exclusively in the conduct of a single function, and on
capital improvements and equipment used in such buildings, must be assigned to
that function.
(b) Depreciation on buildings used for more than one function, and on capital
improvements and equipment used in such buildings, must be allocated to the
individual functions performed in each building on the basis of usable square feet of
space, excluding common areas, such as hallways, stairwells, and restrooms.
(c) Depreciation on buildings, capital improvements and equipment related space (e.g.,
individual rooms, and laboratories) used jointly by more than one function (as
determined by the users of the space) must be treated as follows. The cost of each
jointly used unit of space must be allocated to the benefitting functions on the basis
of:
(i)

the employees and other users on a full-time equivalent (FTE) basis or salaries
and wages of those individual functions benefitting from the use of that space;
or

(ii) organization-wide employee FTEs or salaries and wages applicable to the
benefitting functions of the organization.

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(d) Depreciation on certain capital improvements to land, such as paved parking areas,
fences, sidewalks, and the like, not included in the cost of buildings, must be
allocated to user categories on a FTE basis and distributed to major functions in
proportion to the salaries and wages of all employees applicable to the functions.
(2) Interest. Interest costs must be allocated in the same manner as the depreciation on the
buildings, equipment and capital equipment to which the interest relates.
(3) Operation and maintenance expenses. Operation and maintenance expenses must be
allocated in the same manner as the depreciation.
(4) General administration and general expenses. General administration and general
expenses must be allocated to benefitting functions based on modified total costs (MTC).
The MTC is the modified total direct costs (MTDC), as described in § 200.1, plus the
allocated indirect cost proportion. The expenses included in this category could be
grouped first according to major functions of the organization to which they render
services or provide benefits. The aggregate expenses of each group must then be
allocated to benefitting functions based on MTC.
d.

Order of distribution.
(1) Indirect cost categories consisting of depreciation, interest, operation and maintenance,
and general administration and general expenses must be allocated in that order to the
remaining indirect cost categories as well as to the major functions of the organization.
Other cost categories should be allocated in the order determined to be most appropriate
by the organization. This order of allocation does not apply if cross allocation of costs is
made as provided in section B.3.d.2 of this Appendix.
(2) Normally, an indirect cost category will be considered closed once it has been allocated to
other cost objectives, and costs must not be subsequently allocated to it. However, a
cross allocation of costs between two or more indirect costs categories could be used if
such allocation will result in a more equitable allocation of costs. If a cross allocation is
used, an appropriate modification to the composition of the indirect cost categories is
required.

e.

Application of indirect cost rate or rates. Except where a special indirect cost rate(s) is required
in accordance with section B.5 of this Appendix, the separate groupings of indirect costs
allocated to each major function must be aggregated and treated as a common pool for that
function. The costs in the common pool must then be distributed to individual Federal awards
included in that function by use of a single indirect cost rate.

f.

Distribution basis. Indirect costs must be distributed to applicable Federal awards and other
benefitting activities within each major function on the basis of MTDC (see definition in §
200.1).

g.

Individual Rate Components. An indirect cost rate must be determined for each separate
indirect cost pool developed. The rate in each case must be stated as the percentage which the
amount of the particular indirect cost pool is of the distribution base identified with that pool.
Each indirect cost rate negotiation or determination agreement must include development of
the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost
pools must be classified within two broad categories: “Facilities” and “Administration,” as
described in § 200.414(a).

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4. Direct Allocation Method
a.

Some nonprofit organizations treat all costs as direct costs except general administration and
general expenses. These organizations generally separate their costs into three basic
categories:
(i)

General administration and general expenses,

(ii) fundraising, and
(iii) other direct functions (including projects performed under Federal awards). Joint costs,
such as depreciation, rental costs, operation and maintenance of facilities, telephone
expenses, and the like are prorated individually as direct costs to each category and to
each Federal award or other activity using a base most appropriate to the particular cost
being prorated.
b.

This method is acceptable, provided each joint cost is prorated using a base which accurately
measures the benefits provided to each Federal award or other activity. The bases must be
established in accordance with reasonable criteria and be supported by current data. This
method is compatible with the Standards of Accounting and Financial Reporting for Voluntary
Health and Welfare Organizations issued jointly by the National Health Council, Inc., the
National Assembly of Voluntary Health and Social Welfare Organizations, and the United Way of
America.

c.

Under this method, indirect costs consist exclusively of general administration and general
expenses. In all other respects, the organization's indirect cost rates must be computed in the
same manner as that described in section B.2 of this Appendix.

5. Special Indirect Cost Rates
In some instances, a single indirect cost rate for all activities of an organization or for each major
function of the organization may not be appropriate, since it would not take into account those
different factors which may substantially affect the indirect costs applicable to a particular segment
of work. For this purpose, a particular segment of work may be that performed under a single
Federal award or it may consist of work under a group of Federal awards performed in a common
environment. These factors may include the physical location of the work, the level of administrative
support required, the nature of the facilities or other resources employed, the scientific disciplines or
technical skills involved, the organizational arrangements used, or any combination thereof. When a
particular segment of work is performed in an environment which appears to generate a significantly
different level of indirect costs, provisions should be made for a separate indirect cost pool
applicable to such work. The separate indirect cost pool should be developed during the course of
the regular allocation process, and the separate indirect cost rate resulting therefrom should be
used, provided it is determined that (i) the rate differs significantly from that which would have been
obtained under sections B.2, B.3, and B.4 of this Appendix, and (ii) the volume of work to which the
rate would apply is material.

C. Negotiation and Approval of Indirect Cost Rates
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1. Definitions
As used in this section, the following terms have the meanings set forth in this section:
a.

Cognizant agency for indirect costs means the Federal agency responsible for negotiating and
approving indirect cost rates for a nonprofit organization on behalf of all Federal agencies.

b.

Predetermined rate means an indirect cost rate, applicable to a specified current or future
period, usually the organization's fiscal year. The rate is based on an estimate of the costs to be
incurred during the period. A predetermined rate is not subject to adjustment.

c.

Fixed rate means an indirect cost rate which has the same characteristics as a predetermined
rate, except that the difference between the estimated costs and the actual costs of the period
covered by the rate is carried forward as an adjustment to the rate computation of a
subsequent period.

d.

Final rate means an indirect cost rate applicable to a specified past period which is based on
the actual costs of the period. A final rate is not subject to adjustment.

e.

Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified
period which is used for funding, interim reimbursement, and reporting indirect costs on
Federal awards pending the establishment of a final rate for the period.

f.

Indirect cost proposal means the documentation prepared by an organization to substantiate its
claim for the reimbursement of indirect costs. This proposal provides the basis for the review
and negotiation leading to the establishment of an organization's indirect cost rate.

g.

Cost objective means a function, organizational subdivision, contract, Federal award, or other
work unit for which cost data are desired and for which provision is made to accumulate and
measure the cost of processes, projects, jobs and capitalized projects.

2. Negotiation and Approval of Rates
a.

Unless different arrangements are agreed to by the Federal agencies concerned, the Federal
agency with the largest dollar value of Federal awards directly funded to an organization will be
designated as the cognizant agency for indirect costs for the negotiation and approval of the
indirect cost rates and, where necessary, other rates such as fringe benefit and computer
charge-out rates. Once an agency is assigned cognizance for a particular nonprofit
organization, the assignment will not be changed unless there is a shift in the dollar volume of
the Federal awards directly funded to the organization for at least three years. All concerned
Federal agencies must be given the opportunity to participate in the negotiation process but,
after a rate has been agreed upon, it will be accepted by all Federal agencies. When a Federal
agency has reason to believe that special operating factors affecting its Federal awards
necessitate special indirect cost rates in accordance with section B.5 of this Appendix, it will,
prior to the time the rates are negotiated, notify the cognizant agency for indirect costs. (See
also § 200.414.) If the nonprofit does not receive any funding from any Federal agency, the
pass-through entity is responsible for the negotiation of the indirect cost rates in accordance
with § 200.332(a)(4).

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b.

Except as otherwise provided in § 200.414(f), a nonprofit organization which has not previously
established an indirect cost rate with a Federal agency must submit its initial indirect cost
proposal immediately after the organization is advised that a Federal award will be made and,
in no event, later than three months after the effective date of the Federal award.

c.

Unless approved by the cognizant agency for indirect costs in accordance with § 200.414(g),
organizations that have previously established indirect cost rates must submit a new indirect
cost proposal to the cognizant agency for indirect costs within six months after the close of
each fiscal year.

d.

A predetermined rate may be negotiated for use on Federal awards where there is reasonable
assurance, based on past experience and reliable projection of the organization's costs, that the
rate is not likely to exceed a rate based on the organization's actual costs.

e.

Fixed rates may be negotiated where predetermined rates are not considered appropriate. A
fixed rate, however, must not be negotiated if
(i)

all or a substantial portion of the organization's Federal awards are expected to expire
before the carry-forward adjustment can be made;

(ii) the mix of Federal and non-Federal work at the organization is too erratic to permit an
equitable carry-forward adjustment; or
(iii) the organization's operations fluctuate significantly from year to year.
f.

Provisional and final rates must be negotiated where neither predetermined nor fixed rates are
appropriate. Predetermined or fixed rates may replace provisional rates at any time prior to the
close of the organization's fiscal year. If that event does not occur, a final rate will be
established and upward or downward adjustments will be made based on the actual allowable
costs incurred for the period involved.

g.

The results of each negotiation must be formalized in a written agreement between the
cognizant agency for indirect costs and the nonprofit organization. The cognizant agency for
indirect costs must make available copies of the agreement to all concerned Federal agencies.

h.

If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency for
indirect costs and the nonprofit organization, the dispute must be resolved in accordance with
the appeals procedures of the cognizant agency for indirect costs.

i.

To the extent that problems are encountered among the Federal agencies in connection with
the negotiation and approval process, OMB will lend assistance as required to resolve such
problems in a timely manner.

D. Certification of Indirect (F&A) Costs
(1) Required Certification. No proposal to establish indirect (F&A) cost rates must be acceptable unless
such costs have been certified by the nonprofit organization using the Certificate of Indirect (F&A)
Costs set forth in section j. of this appendix. The certificate must be signed on behalf of the
organization by an individual at a level no lower than vice president or chief financial officer for the
organization.
(2) Each indirect cost rate proposal must be accompanied by a certification in the following form:
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Certificate of Indirect (F&A) Costs
This is to certify that to the best of my knowledge and belief:
(1) I have reviewed the indirect (F&A) cost proposal submitted herewith;
(2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate
for [identify period covered by rate] are allowable in accordance with the requirements of the Federal
awards to which they apply and with subpart E of this part.
(3) This proposal does not include any costs which are unallowable under subpart E of this part such as
(without limitation): Public relations costs, contributions and donations, entertainment costs, fines
and penalties, lobbying costs, and defense of fraud proceedings; and
(4) All costs included in this proposal are properly allocable to Federal awards on the basis of a
beneficial or causal relationship between the expenses incurred and the Federal awards to which
they are allocated in accordance with applicable requirements.
I declare that the foregoing is true and correct.
Nonprofit Organization:
Signature:
Name of Official:
Title:
Date of Execution:
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49579, Aug. 13, 2020]

Appendix V to Part 200—State/Local Governmentwide Central Service Cost Allocation Plans

A. General
1.

Most governmental units provide certain services, such as motor pools, computer centers,
purchasing, accounting, etc., to operating agencies on a centralized basis. Since federally-supported
awards are performed within the individual operating agencies, there needs to be a process whereby
these central service costs can be identified and assigned to benefitted activities on a reasonable
and consistent basis. The central service cost allocation plan provides that process. All costs and
other data used to distribute the costs included in the plan should be supported by formal
accounting and other records that will support the propriety of the costs assigned to Federal awards.

2.

Guidelines and illustrations of central service cost allocation plans are provided in a brochure
published by the Department of Health and Human Services entitled “A Guide for State, Local and
Indian Tribal Governments: Cost Principles and Procedures for Developing Cost Allocation Plans and
Indirect Cost Rates for Agreements with the Federal Government.” A copy of this brochure may be
obtained from the HHS Cost Allocation Services or at their website.

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B. Definitions
1.

Agency or operating agency means an organizational unit or sub-division within a governmental unit
that is responsible for the performance or administration of Federal awards or activities of the
governmental unit.

2.

Allocated central services means central services that benefit operating agencies but are not billed to
the agencies on a fee-for-service or similar basis. These costs are allocated to benefitted agencies
on some reasonable basis. Examples of such services might include general accounting, personnel
administration, purchasing, etc.

3.

Billed central services means central services that are billed to benefitted agencies or programs on
an individual fee-for-service or similar basis. Typical examples of billed central services include
computer services, transportation services, insurance, and fringe benefits.

4.

Cognizant agency for indirect costs is defined in § 200.1. The determination of cognizant agency for
indirect costs for states and local governments is described in section F.1.

5.

Major local government means local government that receives more than $100 million in direct
Federal awards subject to this Part.

C. Scope of the Central Service Cost Allocation Plans
The central service cost allocation plan will include all central service costs that will be claimed (either as
a billed or an allocated cost) under Federal awards and will be documented as described in section E.
omitted from the plan will not be reimbursed.

D. Submission Requirements
1.

Each state will submit a plan to the Department of Health and Human Services for each year in which
it claims central service costs under Federal awards. The plan should include
(a) a projection of the next year's allocated central service cost (based either on actual costs for
the most recently completed year or the budget projection for the coming year), and
(b) a reconciliation of actual allocated central service costs to the estimated costs used for either
the most recently completed year or the year immediately preceding the most recently
completed year.

2.

Each major local government is also required to submit a plan to its cognizant agency for indirect
costs annually.

3.

All other local governments claiming central service costs must develop a plan in accordance with
the requirements described in this Part and maintain the plan and related supporting documentation
for audit. These local governments are not required to submit their plans for Federal approval unless
they are specifically requested to do so by the cognizant agency for indirect costs. Where a local
government only receives funds as a subrecipient, the pass-through entity will be responsible for
monitoring the subrecipient's plan.

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4.

2 CFR Appendix-V-to-Part-200 D.4.

All central service cost allocation plans will be prepared and, when required, submitted within six
months prior to the beginning of each of the governmental unit's fiscal years in which it proposes to
claim central service costs. Extensions may be granted by the cognizant agency for indirect costs on
a case-by-case basis.

E. Documentation Requirements for Submitted Plans
The documentation requirements described in this section may be modified, expanded, or reduced by the
cognizant agency for indirect costs on a case-by-case basis. For example, the requirements may be
reduced for those central services which have little or no impact on Federal awards. Conversely, if a
review of a plan indicates that certain additional information is needed, and will likely be needed in future
years, it may be routinely requested in future plan submissions. Items marked with an asterisk (*) should
be submitted only once; subsequent plans should merely indicate any changes since the last plan.

1. General
All proposed plans must be accompanied by the following: an organization chart sufficiently detailed
to show operations including the central service activities of the state/local government whether or
not they are shown as benefitting from central service functions; a copy of the Comprehensive
Annual Financial Report (or a copy of the Executive Budget if budgeted costs are being proposed) to
support the allowable costs of each central service activity included in the plan; and, a certification
(see subsection 4.) that the plan was prepared in accordance with this Part, contains only allowable
costs, and was prepared in a manner that treated similar costs consistently among the various
Federal awards and between Federal and non-Federal awards/activities.

2. Allocated Central Services
For each allocated central service*, the plan must also include the following: a brief description of
the service, an identification of the unit rendering the service and the operating agencies receiving
the service, the items of expense included in the cost of the service, the method used to distribute
the cost of the service to benefitted agencies, and a summary schedule showing the allocation of
each service to the specific benefitted agencies. If any self-insurance funds or fringe benefits costs
are treated as allocated (rather than billed) central services, documentation discussed in
subsections 3.b. and c. must also be included.

3. Billed Services
a.

General. The information described in this section must be provided for all billed central
services, including internal service funds, self-insurance funds, and fringe benefit funds.

b.

Internal service funds.
(1) For each internal service fund or similar activity with an operating budget of $5 million or
more, the plan must include: A brief description of each service; a balance sheet for each
fund based on individual accounts contained in the governmental unit's accounting
system; a revenue/expenses statement, with revenues broken out by source, e.g., regular
billings, interest earned, etc.; a listing of all non-operating transfers (as defined by GAAP)
into and out of the fund; a description of the procedures (methodology) used to charge the

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costs of each service to users, including how billing rates are determined; a schedule of
current rates; and, a schedule comparing total revenues (including imputed revenues)
generated by the service to the allowable costs of the service, as determined under this
part, with an explanation of how variances will be handled.
(2) Revenues must consist of all revenues generated by the service, including unbilled and
uncollected revenues. If some users were not billed for the services (or were not billed at
the full rate for that class of users), a schedule showing the full imputed revenues
associated with these users must be provided. Expenses must be broken out by object
cost categories (e.g., salaries, supplies, etc.).
c.

Self-insurance funds. For each self-insurance fund, the plan must include: the fund balance
sheet; a statement of revenue and expenses including a summary of billings and claims paid by
agency; a listing of all non-operating transfers into and out of the fund; the type(s) of risk(s)
covered by the fund (e.g., automobile liability, workers' compensation, etc.); an explanation of
how the level of fund contributions are determined, including a copy of the current actuarial
report (with the actuarial assumptions used) if the contributions are determined on an actuarial
basis; and, a description of the procedures used to charge or allocate fund contributions to
benefitted activities. Reserve levels in excess of claims
(1) submitted and adjudicated but not paid,
(2) submitted but not adjudicated, and
(3) incurred but not submitted must be identified and explained.

d.

Fringe benefits. For fringe benefit costs, the plan must include: a listing of fringe benefits
provided to covered employees, and the overall annual cost of each type of benefit; current
fringe benefit policies; and procedures used to charge or allocate the costs of the benefits to
benefitted activities. In addition, for pension and post-retirement health insurance plans, the
following information must be provided: the governmental unit's funding policies, e.g.,
legislative bills, trust agreements, or state-mandated contribution rules, if different from
actuarially determined rates; the pension plan's costs accrued for the year; the amount funded,
and date(s) of funding; a copy of the current actuarial report (including the actuarial
assumptions); the plan trustee's report; and, a schedule from the activity showing the value of
the interest cost associated with late funding.

4. Required Certification
Each central service cost allocation plan will be accompanied by a certification in the following form:

CERTIFICATE OF COST ALLOCATION PLAN
This is to certify that I have reviewed the cost allocation plan submitted herewith and to the best of
my knowledge and belief:
(1) All costs included in this proposal [identify date] to establish cost allocations or billings for
[identify period covered by plan] are allowable in accordance with the requirements of this Part
and the Federal award(s) to which they apply. Unallowable costs have been adjusted for in
allocating costs as indicated in the cost allocation plan.
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(2) All costs included in this proposal are properly allocable to Federal awards on the basis of a
beneficial or causal relationship between the expenses incurred and the Federal awards to
which they are allocated in accordance with applicable requirements. Further, the same costs
that have been treated as indirect costs have not been claimed as direct costs. Similar types of
costs have been accounted for consistently.
I declare that the foregoing is true and correct.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:

F. Negotiation and Approval of Central Service Plans
1. Federal Cognizant Agency for Indirect Costs Assignments for Cost Negotiation
In general, unless different arrangements are agreed to by the concerned Federal agencies, for
central service cost allocation plans, the cognizant agency responsible for review and approval is the
Federal agency with the largest dollar value of total Federal awards with a governmental unit. For
indirect cost rates and departmental indirect cost allocation plans, the cognizant agency is the
Federal agency with the largest dollar value of direct Federal awards with a governmental unit or
component, as appropriate. Once designated as the cognizant agency for indirect costs, the Federal
agency must remain so for a period of five years. In addition, the following Federal agencies continue
to be responsible for the indicated governmental entities:
Department of Health and Human Services —Public assistance and state-wide cost allocation plans
for all states (including the District of Columbia and Puerto Rico), state and local hospitals,
libraries and health districts.
Department of the Interior —Indian tribal governments, territorial governments, and state and local
park and recreational districts.
Department of Labor —State and local labor departments.
Department of Education —School districts and state and local education agencies.
Department of Agriculture —State and local agriculture departments.
Department of Transportation —State and local airport and port authorities and transit districts.
Department of Commerce —State and local economic development districts.
Department of Housing and Urban Development —State and local housing and development districts.
Environmental Protection Agency —State and local water and sewer districts.
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2. Review
All proposed central service cost allocation plans that are required to be submitted will be reviewed,
negotiated, and approved by the cognizant agency for indirect costs on a timely basis. The cognizant
agency for indirect costs will review the proposal within six months of receipt of the proposal and
either negotiate/approve the proposal or advise the governmental unit of the additional
documentation needed to support/evaluate the proposed plan or the changes required to make the
proposal acceptable. Once an agreement with the governmental unit has been reached, the
agreement will be accepted and used by all Federal agencies, unless prohibited or limited by statute.
Where a Federal awarding agency has reason to believe that special operating factors affecting its
Federal awards necessitate special consideration, the funding agency will, prior to the time the plans
are negotiated, notify the cognizant agency for indirect costs.

3. Agreement
The results of each negotiation must be formalized in a written agreement between the cognizant
agency for indirect costs and the governmental unit. This agreement will be subject to re-opening if
the agreement is subsequently found to violate a statute or the information upon which the plan was
negotiated is later found to be materially incomplete or inaccurate. The results of the negotiation
must be made available to all Federal agencies for their use.

4. Adjustments
Negotiated cost allocation plans based on a proposal later found to have included costs that: (a) are
unallowable (i) as specified by law or regulation, (ii) as identified in subpart F, General Provisions for
selected Items of Cost of this Part, or (iii) by the terms and conditions of Federal awards, or (b) are
unallowable because they are clearly not allocable to Federal awards, must be adjusted, or a refund
must be made at the option of the cognizant agency for indirect costs, including earned or imputed
interest from the date of transfer and debt interest, if applicable, chargeable in accordance with
applicable Federal cognizant agency for indirect costs regulations. Adjustments or cash refunds may
include, at the option of the cognizant agency for indirect costs, earned or imputed interest from the
date of expenditure and delinquent debt interest, if applicable, chargeable in accordance with
applicable cognizant agency claims collection regulations. These adjustments or refunds are
designed to correct the plans and do not constitute a reopening of the negotiation.

G. Other Policies
1. Billed Central Service Activities
Each billed central service activity must separately account for all revenues (including imputed
revenues) generated by the service, expenses incurred to furnish the service, and profit/loss.

2. Working Capital Reserves

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Internal service funds are dependent upon a reasonable level of working capital reserve to operate
from one billing cycle to the next. Charges by an internal service activity to provide for the
establishment and maintenance of a reasonable level of working capital reserve, in addition to the
full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to
60 calendar days cash expenses for normal operating purposes is considered reasonable. A working
capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect
costs in exceptional cases.

3. Carry-Forward Adjustments of Allocated Central Service Costs
Allocated central service costs are usually negotiated and approved for a future fiscal year on a
“fixed with carry-forward” basis. Under this procedure, the fixed amounts for the future year covered
by agreement are not subject to adjustment for that year. However, when the actual costs of the year
involved become known, the differences between the fixed amounts previously approved and the
actual costs will be carried forward and used as an adjustment to the fixed amounts established for
a later year. This “carry-forward” procedure applies to all central services whose costs were fixed in
the approved plan. However, a carry-forward adjustment is not permitted, for a central service
activity that was not included in the approved plan, or for unallowable costs that must be reimbursed
immediately.

4. Adjustments of Billed Central Services
Billing rates used to charge Federal awards must be based on the estimated costs of providing the
services, including an estimate of the allocable central service costs. A comparison of the revenue
generated by each billed service (including total revenues whether or not billed or collected) to the
actual allowable costs of the service will be made at least annually, and an adjustment will be made
for the difference between the revenue and the allowable costs. These adjustments will be made
through one of the following adjustment methods: (a) a cash refund including earned or imputed
interest from the date of transfer and debt interest, if applicable, chargeable in accordance with
applicable Federal cognizant agency for indirect costs regulations to the Federal Government for the
Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c)
adjustments to future billing rates, or (d) adjustments to allocated central service costs.
Adjustments to allocated central services will not be permitted where the total amount of the
adjustment for a particular service (Federal share and non-Federal) share exceeds $500,000.
Adjustment methods may include, at the option of the cognizant agency, earned or imputed interest
from the date of expenditure and delinquent debt interest, if applicable, chargeable in accordance
with applicable cognizant agency claims collection regulations.

5. Records Retention
All central service cost allocation plans and related documentation used as a basis for claiming
costs under Federal awards must be retained for audit in accordance with the records retention
requirements contained in subpart D of this part.

6. Appeals
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If a dispute arises in the negotiation of a plan between the cognizant agency for indirect costs and
the governmental unit, the dispute must be resolved in accordance with the appeals procedures of
the cognizant agency for indirect costs.

7. OMB Assistance
To the extent that problems are encountered among the Federal agencies or governmental units in connection with
the negotiation and approval process, OMB will lend assistance, as required, to resolve such problems in a timely
manner.
[78 FR 78608, Dec. 26, 2013, as amended at 80 FR 54410, Sept. 10, 2015; 85 FR 49581, Aug. 13, 2020]

Appendix VI to Part 200—Public Assistance Cost Allocation Plans

A. General
Federally-financed programs administered by state public assistance agencies are funded predominately
by the Department of Health and Human Services (HHS). In support of its stewardship requirements, HHS
has published requirements for the development, documentation, submission, negotiation, and approval
of public assistance cost allocation plans in Subpart E of 45 CFR Part 95. All administrative costs (direct
and indirect) are normally charged to Federal awards by implementing the public assistance cost
allocation plan. This Appendix extends these requirements to all Federal awarding agencies whose
programs are administered by a state public assistance agency. Major federally-financed programs
typically administered by state public assistance agencies include: Temporary Aid to Needy Families
(TANF), Medicaid, Food Stamps, Child Support Enforcement, Adoption Assistance and Foster Care, and
Social Services Block Grant.

B. Definitions
1.

State public assistance agency means a state agency administering or supervising the
administration of one or more public assistance programs operated by the state as identified in
Subpart E of 45 CFR Part 95. For the purpose of this Appendix, these programs include all programs
administered by the state public assistance agency.

2.

State public assistance agency costs means all costs incurred by, or allocable to, the state public
assistance agency, except expenditures for financial assistance, medical contractor payments, food
stamps, and payments for services and goods provided directly to program recipients.

C. Policy
State public assistance agencies will develop, document and implement, and the Federal Government will
review, negotiate, and approve, public assistance cost allocation plans in accordance with Subpart E of 45
CFR Part 95. The plan will include all programs administered by the state public assistance agency. Where
a letter of approval or disapproval is transmitted to a state public assistance agency in accordance with

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Subpart E, the letter will apply to all Federal agencies and programs. The remaining sections of this
Appendix (except for the requirement for certification) summarize the provisions of Subpart E of 45 CFR
Part 95.

D. Submission, Documentation, and Approval of Public Assistance Cost Allocation Plans
1.

State public assistance agencies are required to promptly submit amendments to the cost allocation
plan to HHS for review and approval.

2.

Under the coordination process outlined in section E, affected Federal agencies will review all new
plans and plan amendments and provide comments, as appropriate, to HHS. The effective date of
the plan or plan amendment will be the first day of the calendar quarter following the event that
required the amendment, unless another date is specifically approved by HHS. HHS, as the cognizant
agency for indirect costs acting on behalf of all affected Federal agencies, will, as necessary,
conduct negotiations with the state public assistance agency and will inform the state agency of the
action taken on the plan or plan amendment.

E. Review of Implementation of Approved Plans
1.

Since public assistance cost allocation plans are of a narrative nature, the review during the plan
approval process consists of evaluating the appropriateness of the proposed groupings of costs
(cost centers) and the related allocation bases. As such, the Federal Government needs some
assurance that the cost allocation plan has been implemented as approved. This is accomplished by
reviews by the Federal awarding agencies, single audits, or audits conducted by the cognizant
agency for indirect costs.

2.

Where inappropriate charges affecting more than one Federal awarding agency are identified, the
cognizant HHS cost negotiation office will be advised and will take the lead in resolving the issue(s)
as provided for in Subpart E of 45 CFR Part 95.

3.

If a dispute arises in the negotiation of a plan or from a disallowance involving two or more Federal
awarding agencies, the dispute must be resolved in accordance with the appeals procedures set out
in 45 CFR Part 16. Disputes involving only one Federal awarding agency will be resolved in
accordance with the Federal awarding agency's appeal process.

4.

To the extent that problems are encountered among the Federal awarding agencies or governmental
units in connection with the negotiation and approval process, the Office of Management and Budget
will lend assistance, as required, to resolve such problems in a timely manner.

F. Unallowable Costs
Claims developed under approved cost allocation plans will be based on allowable costs as identified in this Part.
Where unallowable costs have been claimed and reimbursed, they will be refunded to the program that reimbursed
the unallowable cost using one of the following methods: (a) a cash refund, (b) offset to a subsequent claim, or (c)
credits to the amounts charged to individual Federal awards. Cash refunds, offsets, and credits may include at the
option of the cognizant agency for indirect cost, earned or imputed interest from the date of expenditure and
delinquent debt interest, if applicable, chargeable in accordance with applicable cognizant agency for indirect cost
claims collection regulations.

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[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49581, Aug. 13, 2020]

Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost
Proposals

A. General
1.

Indirect costs are those that have been incurred for common or joint purposes. These costs benefit
more than one cost objective and cannot be readily identified with a particular final cost objective
without effort disproportionate to the results achieved. After direct costs have been determined and
assigned directly to Federal awards and other activities as appropriate, indirect costs are those
remaining to be allocated to benefitted cost objectives. A cost may not be allocated to a Federal
award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has
been assigned to a Federal award as a direct cost.

2.

Indirect costs include
(a) the indirect costs originating in each department or agency of the governmental unit carrying
out Federal awards and
(b) the costs of central governmental services distributed through the central service cost
allocation plan (as described in Appendix V to this part) and not otherwise treated as direct
costs.

3.

Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. A separate
indirect cost rate(s) is usually necessary for each department or agency of the governmental unit
claiming indirect costs under Federal awards. Guidelines and illustrations of indirect cost proposals
are provided in a brochure published by the Department of Health and Human Services entitled “A
Guide for States and Local Government Agencies: Cost Principles and Procedures for Establishing
Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government.”
A copy of this brochure may be obtained from HHS Cost Allocation Services or at their website.

4.

Because of the diverse characteristics and accounting practices of governmental units, the types of
costs which may be classified as indirect costs cannot be specified in all situations. However, typical
examples of indirect costs may include certain state/local-wide central service costs, general
administration of the non-Federal entity accounting and personnel services performed within the
non-Federal entity, depreciation on buildings and equipment, the costs of operating and maintaining
facilities.

5.

This Appendix does not apply to state public assistance agencies. These agencies should refer
instead to Appendix VI to this part.

B. Definitions
1.

Base means the accumulated direct costs (normally either total direct salaries and wages or total
direct costs exclusive of any extraordinary or distorting expenditures) used to distribute indirect
costs to individual Federal awards. The direct cost base selected should result in each Federal award
bearing a fair share of the indirect costs in reasonable relation to the benefits received from the
costs.

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2.

Base period for the allocation of indirect costs is the period in which such costs are incurred and
accumulated for allocation to activities performed in that period. The base period normally should
coincide with the governmental unit's fiscal year, but in any event, must be so selected as to avoid
inequities in the allocation of costs.

3.

Cognizant agency for indirect costs means the Federal agency responsible for reviewing and
approving the governmental unit's indirect cost rate(s) on the behalf of the Federal Government. The
cognizant agency for indirect costs assignment is described in Appendix V, section F.

4.

Final rate means an indirect cost rate applicable to a specified past period which is based on the
actual allowable costs of the period. A final audited rate is not subject to adjustment.

5.

Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate,
except that the difference between the estimated costs and the actual, allowable costs of the period
covered by the rate is carried forward as an adjustment to the rate computation of a subsequent
period.

6.

Indirect cost pool is the accumulated costs that jointly benefit two or more programs or other cost
objectives.

7.

Indirect cost rate is a device for determining in a reasonable manner the proportion of indirect costs
each program should bear. It is the ratio (expressed as a percentage) of the indirect costs to a direct
cost base.

8.

Indirect cost rate proposal means the documentation prepared by a governmental unit or subdivision
thereof to substantiate its request for the establishment of an indirect cost rate.

9.

Predetermined rate means an indirect cost rate, applicable to a specified current or future period,
usually the governmental unit's fiscal year. This rate is based on an estimate of the costs to be
incurred during the period. Except under very unusual circumstances, a predetermined rate is not
subject to adjustment. (Because of legal constraints, predetermined rates are not permitted for
Federal contracts; they may, however, be used for grants or cooperative agreements.) Predetermined
rates may not be used by governmental units that have not submitted and negotiated the rate with
the cognizant agency for indirect costs. In view of the potential advantages offered by this
procedure, negotiation of predetermined rates for indirect costs for a period of two to four years
should be the norm in those situations where the cost experience and other pertinent facts available
are deemed sufficient to enable the parties involved to reach an informed judgment as to the
probable level of indirect costs during the ensuing accounting periods.

10. Provisional rate means a temporary indirect cost rate applicable to a specified period which is used
for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the
establishment of a “final” rate for that period.

C. Allocation of Indirect Costs and Determination of Indirect Cost Rates
1. General
a.

Where a governmental unit's department or agency has only one major function, or where all its
major functions benefit from the indirect costs to approximately the same degree, the
allocation of indirect costs and the computation of an indirect cost rate may be accomplished
through simplified allocation procedures as described in subsection 2.

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b.

Where a governmental unit's department or agency has several major functions which benefit
from its indirect costs in varying degrees, the allocation of indirect costs may require the
accumulation of such costs into separate cost groupings which then are allocated individually
to benefitted functions by means of a base which best measures the relative degree of benefit.
The indirect costs allocated to each function are then distributed to individual Federal awards
and other activities included in that function by means of an indirect cost rate(s).

c.

Specific methods for allocating indirect costs and computing indirect cost rates along with the
conditions under which each method should be used are described in subsections 2, 3 and 4.

2. Simplified Method
a.

Where a non-Federal entity's major functions benefit from its indirect costs to approximately the
same degree, the allocation of indirect costs may be accomplished by
(1) classifying the non-Federal entity's total costs for the base period as either direct or
indirect, and
(2) dividing the total allowable indirect costs (net of applicable credits) by an equitable
distribution base. The result of this process is an indirect cost rate which is used to
distribute indirect costs to individual Federal awards. The rate should be expressed as the
percentage which the total amount of allowable indirect costs bears to the base selected.
This method should also be used where a governmental unit's department or agency has
only one major function encompassing a number of individual projects or activities, and
may be used where the level of Federal awards to that department or agency is relatively
small.

b.

Both the direct costs and the indirect costs must exclude capital expenditures and unallowable
costs. However, unallowable costs must be included in the direct costs if they represent
activities to which indirect costs are properly allocable.

c.

The distribution base may be
(1) total direct costs (excluding capital expenditures and other distorting items, such as passthrough funds, subcontracts in excess of $25,000, participant support costs, etc.),
(2) direct salaries and wages, or
(3) another base which results in an equitable distribution.

3. Multiple Allocation Base Method
a.

Where a non-Federal entity's indirect costs benefit its major functions in varying degrees, such
costs must be accumulated into separate cost groupings. Each grouping must then be
allocated individually to benefitted functions by means of a base which best measures the
relative benefits.

b.

The cost groupings should be established so as to permit the allocation of each grouping on
the basis of benefits provided to the major functions. Each grouping should constitute a pool of
expenses that are of like character in terms of the functions they benefit and in terms of the

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allocation base which best measures the relative benefits provided to each function. The
number of separate groupings should be held within practical limits, taking into consideration
the materiality of the amounts involved and the degree of precision needed.
c.

Actual conditions must be taken into account in selecting the base to be used in allocating the
expenses in each grouping to benefitted functions. When an allocation can be made by
assignment of a cost grouping directly to the function benefitted, the allocation must be made
in that manner. When the expenses in a grouping are more general in nature, the allocation
should be made through the use of a selected base which produces results that are equitable to
both the Federal Government and the governmental unit. In general, any cost element or related
factor associated with the governmental unit's activities is potentially adaptable for use as an
allocation base provided that:
(1) it can readily be expressed in terms of dollars or other quantitative measures (total direct
costs, direct salaries and wages, staff hours applied, square feet used, hours of usage,
number of documents processed, population served, and the like), and
(2) it is common to the benefitted functions during the base period.

d.

Except where a special indirect cost rate(s) is required in accordance with paragraph (C)(4) of
this Appendix, the separate groupings of indirect costs allocated to each major function must
be aggregated and treated as a common pool for that function. The costs in the common pool
must then be distributed to individual Federal awards included in that function by use of a
single indirect cost rate.

e.

The distribution base used in computing the indirect cost rate for each function may be
(1) total direct costs (excluding capital expenditures and other distorting items such as passthrough funds, subawards in excess of $25,000, participant support costs, etc.),
(2) direct salaries and wages, or
(3) another base which results in an equitable distribution. An indirect cost rate should be
developed for each separate indirect cost pool developed. The rate in each case should be
stated as the percentage relationship between the particular indirect cost pool and the
distribution base identified with that pool.

4. Special Indirect Cost Rates
a.

In some instances, a single indirect cost rate for all activities of a non-Federal entity or for each
major function of the agency may not be appropriate. It may not take into account those
different factors which may substantially affect the indirect costs applicable to a particular
program or group of programs. The factors may include the physical location of the work, the
level of administrative support required, the nature of the facilities or other resources employed,
the organizational arrangements used, or any combination thereof. When a particular Federal
award is carried out in an environment which appears to generate a significantly different level
of indirect costs, provisions should be made for a separate indirect cost pool applicable to that
Federal award. The separate indirect cost pool should be developed during the course of the
regular allocation process, and the separate indirect cost rate resulting therefrom should be
used, provided that:

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(1) The rate differs significantly from the rate which would have been developed under
paragraphs (C)(2) and (C)(3) of this Appendix, and
(2) the Federal award to which the rate would apply is material in amount.
b.

Where Federal statutes restrict the reimbursement of certain indirect costs, it may be necessary
to develop a special rate for the affected Federal award. Where a “restricted rate” is required,
the same procedure for developing a non-restricted rate will be used except for the additional
step of the elimination from the indirect cost pool those costs for which the law prohibits
reimbursement.

D. Submission and Documentation of Proposals
1. Submission of Indirect Cost Rate Proposals
a.

All departments or agencies of the governmental unit desiring to claim indirect costs under
Federal awards must prepare an indirect cost rate proposal and related documentation to
support those costs. The proposal and related documentation must be retained for audit in
accordance with the records retention requirements contained in § 200.334.

b.

A governmental department or agency unit that receives more than $35 million in direct Federal
funding must submit its indirect cost rate proposal to its cognizant agency for indirect costs.
Other governmental department or agency must develop an indirect cost proposal in
accordance with the requirements of this Part and maintain the proposal and related
supporting documentation for audit. These governmental departments or agencies are not
required to submit their proposals unless they are specifically requested to do so by the
cognizant agency for indirect costs. Where a non-Federal entity only receives funds as a
subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the
subrecipient's indirect costs.

c.

Each Indian tribal government desiring reimbursement of indirect costs must submit its indirect
cost proposal to the Department of the Interior (its cognizant agency for indirect costs).

d.

Indirect cost proposals must be developed (and, when required, submitted) within six months
after the close of the governmental unit's fiscal year, unless an exception is approved by the
cognizant agency for indirect costs. If the proposed central service cost allocation plan for the
same period has not been approved by that time, the indirect cost proposal may be prepared
including an amount for central services that is based on the latest federally-approved central
service cost allocation plan. The difference between these central service amounts and the
amounts ultimately approved will be compensated for by an adjustment in a subsequent
period.

2. Documentation of Proposals
The following must be included with each indirect cost proposal:
a.

The rates proposed, including subsidiary work sheets and other relevant data, cross referenced
and reconciled to the financial data noted in subsection b. Allocated central service costs will
be supported by the summary table included in the approved central service cost allocation

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plan. This summary table is not required to be submitted with the indirect cost proposal if the
central service cost allocation plan for the same fiscal year has been approved by the cognizant
agency for indirect costs and is available to the funding agency.
b.

A copy of the financial data (financial statements, comprehensive annual financial report,
executive budgets, accounting reports, etc.) upon which the rate is based. Adjustments
resulting from the use of unaudited data will be recognized, where appropriate, by the Federal
cognizant agency for indirect costs in a subsequent proposal.

c.

The approximate amount of direct base costs incurred under Federal awards. These costs
should be broken out between salaries and wages and other direct costs.

d.

A chart showing the organizational structure of the agency during the period for which the
proposal applies, along with a functional statement(s) noting the duties and/or responsibilities
of all units that comprise the agency. (Once this is submitted, only revisions need be submitted
with subsequent proposals.)

3. Required certification.
Each indirect cost rate proposal must be accompanied by a certification in the following form:

Certificate of Indirect Costs
This is to certify that I have reviewed the indirect cost rate proposal submitted herewith and to the best of my
knowledge and belief:
(1) All costs included in this proposal [identify date] to establish billing or final indirect costs rates for [identify
period covered by rate] are allowable in accordance with the requirements of the Federal award(s) to
which they apply and the provisions of this Part. Unallowable costs have been adjusted for in allocating
costs as indicated in the indirect cost proposal
(2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or
causal relationship between the expenses incurred and the agreements to which they are allocated in
accordance with applicable requirements. Further, the same costs that have been treated as indirect
costs have not been claimed as direct costs. Similar types of costs have been accounted for consistently
and the Federal Government will be notified of any accounting changes that would affect the
predetermined rate.
I declare that the foregoing is true and correct.
Governmental Unit:
Signature:
Name of Official:
Title:

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Date of Execution:

E. Negotiation and Approval of Rates
1.

Indirect cost rates will be reviewed, negotiated, and approved by the cognizant agency on a timely basis.
Once a rate has been agreed upon, it will be accepted and used by all Federal agencies unless prohibited
or limited by statute. Where a Federal awarding agency has reason to believe that special operating
factors affecting its Federal awards necessitate special indirect cost rates, the funding agency will, prior
to the time the rates are negotiated, notify the cognizant agency for indirect costs.

2.

The use of predetermined rates, if allowed, is encouraged where the cognizant agency for indirect costs
has reasonable assurance based on past experience and reliable projection of the non-Federal entity's
costs, that the rate is not likely to exceed a rate based on actual costs. Long-term agreements utilizing
predetermined rates extending over two or more years are encouraged, where appropriate.

3.

The results of each negotiation must be formalized in a written agreement between the cognizant agency
for indirect costs and the governmental unit. This agreement will be subject to re-opening if the
agreement is subsequently found to violate a statute, or the information upon which the plan was
negotiated is later found to be materially incomplete or inaccurate. The agreed upon rates must be made
available to all Federal agencies for their use.

4.

Refunds must be made if proposals are later found to have included costs that
(a) are unallowable
(i)

as specified by law or regulation,

(ii) as identified in § 200.420, or
(iii) by the terms and conditions of Federal awards, or
(b) are unallowable because they are clearly not allocable to Federal awards. These adjustments or
refunds will be made regardless of the type of rate negotiated (predetermined, final, fixed, or
provisional).

F. Other Policies
1. Fringe Benefit Rates
If overall fringe benefit rates are not approved for the governmental unit as part of the central service cost
allocation plan, these rates will be reviewed, negotiated and approved for individual recipient agencies
during the indirect cost negotiation process. In these cases, a proposed fringe benefit rate computation
should accompany the indirect cost proposal. If fringe benefit rates are not used at the recipient agency
level (i.e., the agency specifically identifies fringe benefit costs to individual employees), the governmental
unit should so advise the cognizant agency for indirect costs.

2. Billed Services Provided by the Recipient Agency
In some cases, governmental departments or agencies (components of the governmental unit) provide
and bill for services similar to those covered by central service cost allocation plans (e.g., computer
centers). Where this occurs, the governmental departments or agencies (components of the
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governmental unit)should be guided by the requirements in Appendix V relating to the development of
billing rates and documentation requirements, and should advise the cognizant agency for indirect costs
of any billed services. Reviews of these types of services (including reviews of costing/billing
methodology, profits or losses, etc.) will be made on a case-by-case basis as warranted by the
circumstances involved.

3. Indirect Cost Allocations Not Using Rates
In certain situations, governmental departments or agencies (components of the governmental unit),
because of the nature of their Federal awards, may be required to develop a cost allocation plan that
distributes indirect (and, in some cases, direct) costs to the specific funding sources. In these cases, a
narrative cost allocation methodology should be developed, documented, maintained for audit, or
submitted, as appropriate, to the cognizant agency for indirect costs for review, negotiation, and approval.

4. Appeals
If a dispute arises in a negotiation of an indirect cost rate (or other rate) between the cognizant agency for
indirect costs and the governmental unit, the dispute must be resolved in accordance with the appeals
procedures of the cognizant agency for indirect costs.

5. Collection of Unallowable Costs and Erroneous Payments
Costs specifically identified as unallowable and charged to Federal awards either directly or indirectly will
be refunded (including interest chargeable in accordance with applicable Federal cognizant agency for
indirect costs regulations).

6. OMB Assistance
To the extent that problems are encountered among the Federal agencies or governmental units in connection with
the negotiation and approval process, OMB will lend assistance, as required, to resolve such problems in a timely
manner.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75889, Dec. 19, 2014; 85 FR 49581, Aug. 13, 2020]

Appendix VIII to Part 200—Nonprofit Organizations Exempted From Subpart E of Part 200
1.

Advance Technology Institute (ATI), Charleston, South Carolina

2.

Aerospace Corporation, El Segundo, California

3.

American Institutes of Research (AIR), Washington, DC

4.

Argonne National Laboratory, Chicago, Illinois

5.

Atomic Casualty Commission, Washington, DC

6.

Battelle Memorial Institute, Headquartered in Columbus, Ohio

7.

Brookhaven National Laboratory, Upton, New York

8.

Charles Stark Draper Laboratory, Incorporated, Cambridge, Massachusetts

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2 CFR Appendix-VIII-to-Part-200 9.

CNA Corporation (CNAC), Alexandria, Virginia

10. Environmental Institute of Michigan, Ann Arbor, Michigan
11. Georgia Institute of Technology/Georgia Tech Applied Research Corporation/Georgia Tech Research
Institute, Atlanta, Georgia
12. Hanford Environmental Health Foundation, Richland, Washington
13. IIT Research Institute, Chicago, Illinois
14. Institute of Gas Technology, Chicago, Illinois
15. Institute for Defense Analysis, Alexandria, Virginia
16. LMI, McLean, Virginia
17. Mitre Corporation, Bedford, Massachusetts
18. Noblis, Inc., Falls Church, Virginia
19. National Radiological Astronomy Observatory, Green Bank, West Virginia
20. National Renewable Energy Laboratory, Golden, Colorado
21. Oak Ridge Associated Universities, Oak Ridge, Tennessee
22. Rand Corporation, Santa Monica, California
23. Research Triangle Institute, Research Triangle Park, North Carolina
24. Riverside Research Institute, New York, New York
25. South Carolina Research Authority (SCRA), Charleston, South Carolina
26. Southern Research Institute, Birmingham, Alabama
27. Southwest Research Institute, San Antonio, Texas
28. SRI International, Menlo Park, California
29. Syracuse Research Corporation, Syracuse, New York
30. Universities Research Association, Incorporated (National Acceleration Lab), Argonne, Illinois
31. Urban Institute, Washington DC
32. Nonprofit insurance companies, such as Blue Cross and Blue Shield Organizations
33. Other nonprofit organizations as negotiated with Federal awarding agencies
[78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49582, Aug. 13, 2020]

Appendix IX to Part 200—Hospital Cost Principles
Until such time as revised guidance is proposed and implemented for hospitals, the existing principles located at 45
CFR part 75 Appendix IX, entitled “Principles for Determining Cost Applicable to Research and Development Under
Grants and Contracts with Hospitals,” remain in effect.
[86 FR 10440, Feb. 22, 2021]

Appendix X to Part 200—Data Collection Form (Form SF–SAC)
The Data Collection Form SF–SAC is available on the FAC Web site.

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Appendix XI to Part 200—Compliance Supplement
The compliance supplement is available on the OMB website.
[85 FR 49582, Aug. 13, 2020]

Appendix XII to Part 200—Award Term and Condition for Recipient Integrity and Performance
Matters

A. Reporting of Matters Related to Recipient Integrity and Performance
1. General Reporting Requirement
If the total value of your currently active grants, cooperative agreements, and procurement contracts
from all Federal awarding agencies exceeds $10,000,000 for any period of time during the period of
performance of this Federal award, then you as the recipient during that period of time must
maintain the currency of information reported to the System for Award Management (SAM) that is
made available in the designated integrity and performance system (currently the Federal Awardee
Performance and Integrity Information System (FAPIIS)) about civil, criminal, or administrative
proceedings described in paragraph 2 of this award term and condition. This is a statutory
requirement under section 872 of Public Law 110–417, as amended (41 U.S.C. 2313). As required by
section 3010 of Public Law 111–212, all information posted in the designated integrity and
performance system on or after April 15, 2011, except past performance reviews required for Federal
procurement contracts, will be publicly available.

2. Proceedings About Which You Must Report
Submit the information required about each proceeding that:
a.

Is in connection with the award or performance of a grant, cooperative agreement, or
procurement contract from the Federal Government;

b.

Reached its final disposition during the most recent five-year period; and

c.

Is one of the following:
(1) A criminal proceeding that resulted in a conviction, as defined in paragraph 5 of this award
term and condition;
(2) A civil proceeding that resulted in a finding of fault and liability and payment of a monetary
fine, penalty, reimbursement, restitution, or damages of $5,000 or more;
(3) An administrative proceeding, as defined in paragraph 5. of this award term and condition,
that resulted in a finding of fault and liability and your payment of either a monetary fine or
penalty of $5,000 or more or reimbursement, restitution, or damages in excess of
$100,000; or
(4) Any other criminal, civil, or administrative proceeding if:

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(i)

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It could have led to an outcome described in paragraph 2.c.(1), (2), or (3) of this
award term and condition;

(ii) It had a different disposition arrived at by consent or compromise with an
acknowledgment of fault on your part; and
(iii) The requirement in this award term and condition to disclose information about the
proceeding does not conflict with applicable laws and regulations.

3. Reporting Procedures
Enter in the SAM Entity Management area the information that SAM requires about each proceeding
described in paragraph 2 of this award term and condition. You do not need to submit the
information a second time under assistance awards that you received if you already provided the
information through SAM because you were required to do so under Federal procurement contracts
that you were awarded.

4. Reporting Frequency
During any period of time when you are subject to the requirement in paragraph 1 of this award term
and condition, you must report proceedings information through SAM for the most recent five year
period, either to report new information about any proceeding(s) that you have not reported
previously or affirm that there is no new information to report. Recipients that have Federal contract,
grant, and cooperative agreement awards with a cumulative total value greater than $10,000,000
must disclose semiannually any information about the criminal, civil, and administrative
proceedings.

5. Definitions
For purposes of this award term and condition:
a.

Administrative proceeding means a non-judicial process that is adjudicatory in nature in order
to make a determination of fault or liability (e.g., Securities and Exchange Commission
Administrative proceedings, Civilian Board of Contract Appeals proceedings, and Armed
Services Board of Contract Appeals proceedings). This includes proceedings at the Federal and
State level but only in connection with performance of a Federal contract or grant. It does not
include audits, site visits, corrective plans, or inspection of deliverables.

b.

Conviction, for purposes of this award term and condition, means a judgment or conviction of a
criminal offense by any court of competent jurisdiction, whether entered upon a verdict or a
plea, and includes a conviction entered upon a plea of nolo contendere.

c.

Total value of currently active grants, cooperative agreements, and procurement contracts
includes—
(1) Only the Federal share of the funding under any Federal award with a recipient cost share
or match; and
(2) The value of all expected funding increments under a Federal award and options, even if
not yet exercised.

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B.

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[Reserved]

[80 FR 43310, July 22, 2015, as amended at 85 FR 49582, Aug. 13, 2020]

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