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CP5?
cr
TABLE OF CONTENTS
PREFACE
SECTION I-
SECTION II-
SECTION III-
APPENDIX 1-
APPENDIX 2-
APPENDIX 3-
APPENDIX 4-
APPENDIX 5-
Indirect Cost - General Information
Nature of Indirect Costs
Indirect Costs on EPA Grants
Indirect Cost Rate
Provisional Rate
Final Rate
Preparation of Indirect Cost Proposal
Submission of Indirect Cost Proposal
General Information
Supporting Documentation
Sample Indirect Cost Proposal Format
Information Needed.from the Organization
for an Evaluation of an Indirect Cost
Rate Proposal
OMB Circular No. A-122, Lobbying Revision
OMB Circular No. A-122, Cost Principles
for Nonprofit Organizations
Sample Form-Certification b'y an Authorized
Nonprofit Organization Official
Page No.
1
2
3-4
5
6-8
'9
10-31
32-45
46
O
CO
S3
CO
U.S. EPA Headquarters Library
Mail code 3201
1200 Pennsylvania Avenue NW
Washington DC 20460 -
HEADQUARTERS UBSA8Y
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
.
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PREFACE
This brochure is a guide for nonprofit organizations subject to the
provisions of Office of Management and Budget (OMB) Circular A-122 to
assist in understanding the concept of indirect cost rates and to help
in preparing indirect cost rate proposals for Federal grants. The
guidelines apply to most situations for nonprofit organizations.
Section I provides general information on the nature
of indirect costs and indirect cost rates.
Section -II provides guidelines for preparing, an indirect
cost proposal.
Section III provides guidelines for submission of an indirect
cost proposal.
Appendix 1 provides a sample indirect .cost proposal format.
Appendix 2 provides the information needed from the
organization to support an indirect cost rate proposal
and EPA's.evaluation.
s *
Appendix 3 includes revision to OMB Circular A-122, "Cost
Principles for Nonprofit Organizations", to clarify
requirements for maintenance and access.to records for
costs associated with legislative lobbying and political •
activities.
Appendix 4 includes OMB Circular .A-122, "Cost Principles
for Nonprofit Organizations".
Appendix 5 includes a sample form of a certification by
an authorized organization official..
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SECTION I_ ^ Indirect Costs ^ General Information
Nature of Indirect Cos t s^
Indirect costs are joint or common costs benefiting more than one
program and not readily identifiable with a specific program. Rent,
heat, light, power, accounting, payroll, personnel, and administration
are costs typically considered indirect costs.
Indirect Costs on EPA Grants
If indirect costs are proposed on a grant, the means by which the
indirect cost are estimated must be supported by either, (1) a federally
approved indirect cost agreement effective for the period of performance
of the grant or, (2) an indirect cost proposal which supports the
indirect costs proposed.
Indirect Cost Rate
The easiest means to determine the amount of common or Joint costs to be
borne by each program is to use an indirect cost rate. An indirect cost
rate is computed by grouping joint or common costs into a pool and
dividing the pool by a cost base common to all programs. The result is
an indirect cost rate. The rate is applied to the base costs of a
program to determine the share of indirect cost to be allocated to that
program.
An indirect cost rate is not a percentage that is guessed at. It is a
logical means to determine the amount of joint or common costs each
program should.bear. The rate is computed using accounting data (budget
or actual) of the organization and a base that approximates benefits
received from the indirect cost pool.
Indirect costs are reimbursed based on an organization's indirect cost
rate, subject to any statutory or administrative limitations, OMB
Circular A-122 "Cost Principles for Nonprofit Organizations", or the
Environmental Protection Agency grant regulations.
Provisional Rate .
A provisional indirect cost rate is an estimated rate established to
permit funding and reporting indirect 'costs pending establishment of a
final rate. The.estimated rate may be based on actual costs of-the most
recently completed fiscal year or budgets. But, in any case, the
provisional rate should be calculated using the best estimate of what is
expected to be incurred during the performance period of the grant.
Final Rate
A final indirect cost rate is a permanent rate established after actual
costs for a specific period (usually a fiscal year) are known. Final
rates are used to adjust indirect costs initially claimed based on
provisional rates.
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SECTION II - Preparation of an Indirect- Cost Proposal
There is no single method to prepare an indirect cost rate proposal.
There are as many methods as accounting systems. However, there are
several basic steps that must be followed in all cases. These steps
are: .
1. Determine the Accounting Data. The first step i-n preparing an
indirect cost rate proposal is to decide on the accounting data1 to use
for estimating the indirect cost rate: historical costs or budgetary
data. For estimating future rates, the data selected should approximate
the costs that will be incurred during the performance of the grant.
'2. Classify Costs. Once the accounting basis for. estimating the
rate is selected, the next.and most difficult step, is to analyze each
element of cost and decide which costs are indirect and which are
direct. 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 in all situations. But, there
are two fundamental concepts to keep in mind when classifying costs: 1}
indirect costs are joint or common costs and 2) costs must be treated
consistently.
Indirect costs.are costs incurred for common or joint purposes and
cannot be readily identified to a particular final cost objective such
as a Federal grant. Office rent or general accounting are good and
obvious examples of .joint or common costs that cannot be easily
identified to a specific program. Personnel administration and office
supplies are other examples of Joint or common costs.
,/
It is imperative to treat cost consistently for all .programs and
activities of the organization. If a cost is treated as a direct cost
for the Federal program, the same type of.cost.incurred for another
program should be treated as a direct cost to that program. For .
example, if long distance telephone costs are direct charged to Federal
Grant #1, long distance telephone costs of other programs should be
classified as direct costs, and not included in the indirect cost pool.
(However, long distance telephone cost associated with allowable
administrative efforts-can be classified as an indirect cost. See
Footnote 1.} ,
All administrative costs could be classified as joint or common costs.
However, some efforts which may be considered administrative by the
organization, are .not allowable or allocable to Federal programs.
.Functions such as fund raising, services to members and clients or
services to the general public when significant and necessary to the
mission of the organization, are not indirect costs allocable.to Federal
programs and must be classified as direct cost in accordance with OMB
.Circular A-122.
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Local telephone cost, would be very di-fficult to identify-'directly
to a. specific program without, a lot of effort or without dedicating
phones ,to specific, programs, neither of .which seems very practica.l. So,
in most'situations, all local telephone costs should be classified as
indirect costs. -
Thus, telephone cost is broken down between local and long
distance. Since local telephone costs would be difficult and
impractical to direct charge to all programs, all local telephone costs
are classified as indirect and allocated-to all programs - a consistent
treatment. Long distance calls are identified to specific programs and
administration where the calls were in support of allowable
administrative efforts - also a consistent treatment. An analysis
similar to the one done on telephone costs should be performed for each
element of cost to determine direct/indirect classification.
3- Select the Allocation Base. After all costs have been
classified as direct or indirect, the next step is to select the
allocation base. The allocation base should provide a reasonable
approximation, of- the benefits received by a program from the -costs of
the functions and services in the indirect cost pool. He prefer an
allocation base of salaries and wages. Our experience has shown that
most functions and services which .comprise the cost in an indirect cost
pool benefit people. Therefore, a base that is a factor of people, such
as salaries and wages, usually is a fair and equitable base. Total
direct cost bases tend to overallocate indirect costs to large dollar,
non-personnel costs such as subcontracts and travel, while the functions
and services in the indirect cost pool do not provide benefits to the
same degree. This does not mean that other bases may not be used. If a
base other than salaries and wages is demonstrated by the -organization
to be more equitable, that base may be used.
4. Calculate the Rate. • The final step is to divide the indirect
cost pool by the allocation base and the result is the indirect cost
rate. Appendix 1 is a detailed example of a suggested method for
computing an indirect cost rate. It is only an example and not a
prescribed method. Your proposal should fit your accounting system.
However, this method will fit most situations and provide an excellent
means to compute an indirect cost rate.
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SECTION III. ^ Submission of an Indirect Cost Proposal
General
The indirect cost proposal, or evidence that the proposal was approved
by a Federal agency/ should be submitted with the grant application. An
indirect cost proposal documents how the organization develops and
applies its indirect cost rate. All claims for indirect'costs must be
supported by an indirect cost rate proposal. Organizations that do not
prepare indirect cost proposals risk losing their claims for indirect
costs. The indirect cost rate proposal will be used to establish a rate
for funding indirect costs under the grant. Guidelines on the
preparation of an indirect cost proposal are provided in Section II.
Supporting Docume n t a t ion
The estimated indirect costs and allocation base must be. supported by
either the accounting history {actual costs), budgeted costs, or a
combination of both. If the estimated indirect costs are based on
actual costs.for the most recently completed fiscal year, the proposal
must be accompanied by, and be cross-referenced and reconciled to, the
organization's audited financial statements which account for all
activities. When audited financial statements are not available, the
organization should use the accounting records. If the estimated
indirect costs are based on the organization's budget, the budget and
financial statement for the most recently completed fiscal year must be
submitted with the proposal.
In addition, .the indirect cost rate proposal must contain a
certification by an authorized organization official that the proposal
has been prepared in accordance with Office of Management and Budget
Circular A-122 (see Appendix 5).
Appendix 2 contains a detailed list of the information and documentation
that should be submitted with an indirect cost rate proposal. •
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APPENDIX 1
Notes t • •
j
1. .For this example, the amounts are taken from the organization's
independently audited financial statements. Expenditures reflect the
purpose for which costs shown under total expenditures were incurred.
They may.be identified from (a) the Statement of Functional.Expenses
which is frequently included with the financial statements, (b) the
accounting records maintained by the organization, or (c) an analysis of
the costs in relation to the operation of the organization. . .
2. Salaries and wages, whether .treated as direct costs or indirect
costs, will be based on documented payrolls approved by a responsible
official of the organization. The distribution of salaries and wages to
Federal grants must be supported by personnel activity reports, such as
time sheets, to account for all actual work performed for which .the
employees are compensated. Also, indirect salaries and wages must be
supported by personnel activity reports where the employees performed a ,
combination of indirect cost and direct cost activities. Salaries and
wages fo'r, employees performing all indirect cost activities, such as
administration, accounting, etc., are classified as indirect costs. For
example, no accounting costs will be treated as direct costs to grants
or other activities since these costs are treated as indirect costs.
•*" •*-"•«'-:: -* . • *
3. Fringe benefits paid by an organization for their employees could
consist of paid vacations, holidays and sick leave, health and life
insurance, FICA, workmen's compensation, and retirement. Fringe
benefits, in this illustration, are all. treated as indirect cost.
However, fringe benefits may be allocated based on a fringe benefit' rate
and distributed on the basis of salaries and wages (excluding costs for
vacations, holidays and sick leave). • •
4. In this illustration, all costs for office-rental, repairs and
maintenance, and supplies are classified as.indirect costs.
5. Specific identification (e.g., requisitions, purchase orders)
procedures are used as the basis for charging these costs to
benefiting activities (including Federal grants).
6. The cost of long di-stance calls are charged directly to^benefiting
activities (projects/programs, Federal grants, and indirect
functions). When any costs for long distance calls are specifically
identified as direct costs to Federal grants, all other costs for long.
distance calls would not be classified as indirect costs since this
would be an inconsistent treatment of costs. Therefore, if the cost
of long distance call are identified as direct costs to Federal
grants, all other costs for long' distance calls must be specifically
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APPENDIX 1
Notes; .'."-•
Identified to other projects/programs, and indirect functions to be
consistent in the treatment of costs. If records are not maintained
for identifying the direct costs, the total costs for all long
distance calls would be classified as indirect. Cost of local calls
and monthly service charges are classified as indirect costs.
7. These.adjustments eliminate unallowable costs identified in OMB
Circular A-122 from the indirect cost pool. Examples of unallowable
costs include interest expense, entertainment expense, lobbying, bad
debts or allowances for. doubtful" accounts, f-ines and penalties, losses
on Federal or non-Federal projects, provisions for contingencies, and
charitable contributions. • "
, \ ~ '
8. Includes labor, fringe benefits and other costs associated with
fund raising, public relations and maintenance of membership rolls.
These types of costs are not allocable to Federal programs and must be
classified as direct costs in accordance with OMB Circular A-122.
9.,Only current expenditures should be considered in developing
indirect cost rates. Therefore, capital expenditures (e.g.,
alteration and improvement costs) should be removed from the indirect
cost pool.' However, the organization may include depreciation or use
allowance associated with those assets in accordance with Circular A-
122. " .' • •-•••' • • ' ' -
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APPENDIX 2
INFORMATION/DOCUMENTATION NEEDED FROM THE NONPROFIT ORGANIZATION
The nonprofit organization will need to submit the following
information or documentation to support the'.indirect cost rate
proposed:
1. A copy of the organization's most recently audited financial
statements if this is the basis for the indirect cost rate proposal
along with a reconciliation of the proposal to the audited financial
statements, in total and by cost center.
2. A copy of the organization's fiscal year budget if this is the basis
_;for the indirect cost rate proposal along with a reconciliation of the
proposal to the budget. A copy of the most recently audited financial
statements may be reguested for EPA's evaluation of .the budget.
3. A list of grants .active during-the indirect .cost rate proposal
period and a copy of the budget data for the grant application. The
grants should be identified by purpose, amount, period covered and
numbers assigned by the Federal agency. Indicate if the grants provide
for payment of indirect costs.
4. A schedule of indirect salaries. The schedule should include job'
title, amount and brief description of duties. Some salaries may need-
to be allocated between direct and indirect • activities. The amount
allocated to each activity or function should be identified along with
description of the direct and indirect duties, shown separately, ,
should be provided.
5. A schedule of fringe benefits and payroll taxes by type and
amount. Explain the method by which fringe benefits are
charge/allocated- to activities (project/programs, Federal grants, and
indirect functions).
6. A certification by an authorized organization.official that "the
indirect cost proposal has been prepared in accordance with Office *"*
of Management and Budget Circular A-122 (see.Appendix 5).
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APPENDIX
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. O.C. ZO903
- May 19, 1987
M-87-24
CIRCULAR NO. A-122, Revised
Transnittal Memorandum No. 2
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
SUBJECT: Cost Principles for Nonprofit Organizations.
This memorandum revises OMB Circular A-122, 'Cost Principles
for Nonprofit Organizations, to clarify requirements for .
maintenance and access to records for costs associated with
legislative lobbying and political activities.
In attachment B, section B21, "Lobbying," paragraph c.(4) is
revised as follows:
c.(4) Time logs, calendars, or similar records shall not
be required to be created,for purposes of complying with this
section during any particular calendar month when: (1) the
employee engages in lobbying (as defined in paragraphs (a)
and (b) above) 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
organization has not materially misstated allowable or
unallowable costs of any nature, including legislative
lobbying costs. When conditions (1) and (2) above are met,
organizations are not required to establish records to
support the allowability of claimed costs in addition to
records already required or maintained. Also, when
conditions (1) and (2) above 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.
XTi rector «^^
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Friday
April 27, 1984
Part VII
• *' ' • ~S
Office of
Management and
Budget
Circular A-122: Cost Principles for
Nonprofit Organizations; "Lobbying"
Revision
Department of Defense
General Sendees Administration .
National .Aeronautics and Space
Administration
48 CFR Part 31
Federal Acquisition Regulation; Rnal Rule
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18260
Federal Register / Vol. 49, No. 93 / Friday. April 27.1964 / Notices
OW1C8 Of MANAOEMCKT AND
BUDGET
Ocular A-132; C
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Register •Vol. 49. No. 83 / Friday. April 27. 1984 / Notices
18281
lengthy, dialcsrue between OMB and
affected groups.
The most important changes from the
January proposal were:
• Adoption of an allocation method of
accounting for the costs of lobbying and
related activities:
• A more limited definition of
unallowable casts: and
* Clarifications and limits on
reporting and recordkeeping
requirements in the joint cf the
Paperwork Reduction Act.
the November 1983 proposal initially
provided for a 45-day public comment
penod. 48 FR 30860-50871. Aj a result of
the interest shown by the public and
Congress and the large volume of
comments received by OMB. the
comment penod was extended for thirty -
days until January id. 1934. 48 FR 56463-
56464..
By the end of the public comment
penod. OMB had recewea some 93.800
separate comments. Of ±eae. some
37.500 (93.5*) favored the proposed
revision without further changes: some
4.175. (4.5%) opposed the revision or
sought further modifications: and some
1.92S (2.0%) did not clearly express
either support or criticism. These totals
• include only individually mailed
comments: bulk packages of letters.
including form letters and petitions.
were counted-as single comments.
In finalizing the revision. OMB has
carefully reviewed each of the
comments received. .The November
proposal has been further amended in
several significant respects, and the
final version addresses many of the
concerns raised by the critical
comments. OMB also has conducted
extensive discussions with interested
aembers of Congress and their staffs.
particularly members of the House
Government Operations Committee and
the Senate Subcommittee on
Intergovernmental Relations; Prior to
publication of the November proposal,
OMB had net extensively with
Committee staff to review their
concerns, and several major
modifications were made to the
, proposal to accommodate their
suggestions. OMB has continued to meet
with die Committee staffs during the
public comment period and. following
development of the final language of the
revision. OMB has reviewed this
language with the Committees on
several occasions. In addition. ONfB has
met with the General Accounting Office
at various stages of, the process and is
authorized to state that the Comptroller
General believes that OMB has the clear
legal authority to issue the Circular
amendment published today, and that
he supports it
in. Summary of the Revision
The revision amends Circular A-122
to define certain lobbying activities by
nonprofit Federal grantees and
contractors as unallowable costs which
cannot be paid for with Federal funds.
The most significant provisions make
costs of the following activities
unallowable:
• Federal, state or local electioneering
and support of such entities as campaign
organizations and political action
committees:
• Most direct lobbying of Congress
and. with uie exceptions noted below.
state legislatures, to influence
. legislation:
• Lobbying of the Executive Branch in
connection with decisions to sign or
veto enrolled legislation:
• Efforts to utiiizie state or local
officials to lobby Congress or state
legislatures:
• Grassroots lobbying concerning
either Federal or state legislation: and
• Legislative liaison activities in
support of unallowable lobbying
activities.
The revision is considerably less
encompassing than the earlier proposals
and the current regulations of other
agencies governing for-prefit
contractors, in that it doea not cover:
• Lobbying at the local level
(unallowable under both the Federal
Acquisition Regulation (FAR) and the
Defense Acquisition Regulation (OAR)
supplement to the FAR);
• Lobbying to influence state
legislation, in order to directly reduce
the cost of performing the grant or
contract or to avoid impairing the
organization's authority to do so
(covered under the current FAR, DAR
supplement and the January 1983
proposal):
• Lobbying in the form of a technical
and factual presentation to Congress or
state legislatures, at their request
(unallowable under the current DAR
supplement to the FAR);
• Contacts with Executive Branch
officials other than lobbying for the veto
or signing of enrolled bills (covered
under the January 1983 proposal): and
• Lobbying on regulatory actions
(covered under the January 1983
proposal).
In particular, the revision will make
unallowable only the portion of costs
attributable to lobbying (the
"allocation" approach)—not as in the
January 1983 proposal, entire cost items
used in part for political advocacy (the
so-called "tainting" approach). -
The revision will provide relief from
paperwork and audit burdens for
nonprofit organizations (and. under a
simultaneous change being made in the
FAR. for government contractors). For
example, indirect cost employees (such
as executive directors) will not be
required to maintain time logs or
calendars [for the portion of their time
treated as an indirect cost) if they certify
in good faith that they spend less than
25% of their work time in defined
lobbying activities. Moreover, the clear
standards provided by the revision will
prove of substantial benefit to nonprofit
grantees ir. Audit iiruations by :>>duCL.-.|
the resources necessary ;c rasoi.-e
whether Federal r~-.dj were jpent on
-unallowable activities.
The penalties for violating iiie
revision will b« the same as fcr any
other cost principle in CMS Circular .A-
122. The standard remedy is recovery of
the misspent money. Ic cases of serous •
abuse, however, the grant or contract
may be suspended or •.imzi&ietL ar the
recipient may be ueoarrso, re the
following:
1. The definitional term '.'obbying and
related activities" !\as been changed :o
"tabbying.'
Numerous commenters expressed
concern that the term "related
. activities" could be used in cae future to
expand the scope of unallowable
acivities beyond what is explicitly
defined as unallowable: This was not
OMB's intent which was merely to use
the most appropriate term for describing
the unallowable activities, which
include electioneering and activities '••
supporting unallowable lobbying, as
well as what is normally thought of a
"lobbying."
The original term for the activities
defined as unallowable (in the January.
1983 proposal] was 'political advocacy."
That term was changed to "'.cbbyuig and
related' activities" in the Novemoer
proposal and has now been revised :o
-"lobbying." Deletion 01' the term "related
activities" does not affect the continuing
disallowance of "costs associated with"
unallowable lobbying— including those
activities undertaken to facilitate that
lobbying.
2. The restrictions on direct
legislative lobbying and grassroots
lobbying have been clarified :a caver
attempts to influence "the introduction
of legislation " and "the enactment or
as
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18282
Federal Register / Vol. 49. No. 83 / Friday. April Z7. 1984 / Notices
modification of' * pending
legislation." Sections a(3)
t(4).
Thia change makes man precise tht
'scop* of tht activities disallowed, and
conforms to the IRS definition of
lobbying.
3. The "legislative liaison"provision
has been made less restrictive, and
clarified. Section a(S).
IB the November proposal, all
legislative liaison was deemed to be
unallowable unless it did not relate to
otherwise unallowable activities.
Commenters complained that this
lection was both coo confusing, because
it employed a double negative, and too
restrictive. Section a(5) has beta revised.
to clarify that legislative liaison is •••
unallowable only "when such activities
are carried oh in support of or ia
knowing preparation for as effort to
engage in unallowable lobbying," as
defined in the revision.
4. The exception for providing
assistance ia response to a "specific
written request" has been broadened to
facilitate easier usage aad hat been
narrowed in other rtspevts. Section b(l).
The final version, has been broadened
by deleting the "specific written
request" requirement aad permitting
oral requests, if properly documented:
allowing "cognizant staff members" (ia
addition to Congressmen) to make such'
requests: asd ™«iH'^j Congressional
Record notices sufficient to invoke tht
exception.
The exception also has beta
narrowed in certain respects by limiting
it to information derived from grant or
contract performance that is conveyed
in "hearing testimony, statements or
letters" and requested by legislative
sources; requiring presentations to be
"technical «M factual." fnd further
requiring that the information ia "readily
obtainable and can be readily put in
• deliverable fora." Further, this uat.of tht
term "technical and factual
presentation" avoids use of the
exception whenever technical aad
factual information ia provided ia any
manner of lobbying presentation aad
Likewise avoids tht requirement that
brief advocacy qgncliwffnt following
technical and factual presentations
require separate accountings and
disallowances.
The costs of travel lodging or meals
involved in lobbying activities which
would otherwise be unallowable under
tht terms of section a(3] art nonetheless
made allowable if expended for tht
purpose of offering Congressional •
hearing testimony pursuant to written
request of tht Committee's Chairman or
Ranking Minority Member for a
technical *fnj fsf^nl presentation.
1 Tht state nraivtr clause ia the state
tabbying exception hoi bttn deleted
and tht scope of the exception clarified.
Section b(J).
The state waiver clause was added to
the November 1983 notice ia response to
concerns raised by some nonprofit
organizations. It would have permitted
states to make allowable all state
lobbying by their subgrantets. Upon
further review, however, the clause was
determined to be confusing and
superfluous. Further, under none of
Circular A-122'j other SO cost categories
do states have the right to override
Federal cost standards.
Two significant clarifying changes
have been made ia new section b(2). - -.
First the "lobbying" covered by the
exception has been explicitly limited to
lobbying made unallowable by section
a(3k thus, for example, grassroots
lobbying (covered under section a(4)J
does not come within the exception.
Second, the exception has been
reworded to apply to efforts to influence
state legislation affecting an
organization's authority to perform a •
gnat contract or omer agreement and
efforts to reduce the costs to the
organisation of such performance. The
original language, applying to an
organization s "ability" to perform the
grant, contract or other agreement was
deemed too broad.
9. The exception foe "activity in
connection wjth an empioytt's service
at an ejected or appointed official or
member of a governmental advisory
board" wot deleted. Section c(3) in
November proposal
Tma provision waa put in the Jaauary
1983 proposal to prevent part-time
government officials from being subject
to complete; non-reimbursement aa a
retail of the "tainting" principle. Since
tat allocation method is now used, tht
exception la irrelevant and would open
major loopholes.
7. Tht "disclosure" requirement
relating to tht indirect cost rate
propoool hat ott>n dariffta ana
explicitly tied to existing accounting
guidelines. Section cf.1),
Tht November proposal had required
a statement "Identifying by category,
costs attributable in whole or in pan to
lobbying" and "stating how they are,
accounted for." .
Section c(l) now simply requiree that
total lobbying costs "be separately
identified" in the indirect cost rate
proposal and treated consistently with
other unallowable activity eoatt. aa
required by the operative Circular A-122
accounting provision.
a. Tht Circular A-122 certification
requirement hat beta changed to
in
conform to the Defense aad GSA
November 1983 proposal. Section c(2).
Tht November propossl'j csrtiflcation
requirement pertains to the "Financial
Stints Report" which is prepared oa an
individual grant basis. However. mos<
lobbying activities are accounted for in
an entity's indirect costs, which art
calculated on an organization' wide
basis. Thus, the appropriate place to
certify stich costs is in the Indirect Cost
Rate Proposal as required tasder the
Defense ifld GSA (FAR) epp-'jach. The.; .
final version has been changed to .-euect
this fact
3. The iampiage expiajiixg :he "Z2'*
Rule" exception for n
been clarified- Section i;(4}.
Some commentera said
annual period the 2S£ ruitt ".u
oeattd retroactively p
Intensive Jatt-year toboytiMi could
remove the ruie'j paperwork ?!vux;-3z\
for persona who aad previously
estimated that the 25ft trigger wooia act
be exceeded. Other commea^r? MIC it
was unclear whether the -ui» was to oe
bated oa 40-hour weeks or the actual
hours worked In response, ihe phrase
"2SH of the time" baa been revised to
"23* of hit compensated hours of
employment during that calendar
month."
V. Putpass of thei Revision
As sat forth at greater length is tfca
preambles to the January ana November
notices, tht purpose or this re^sicn is is
establish comprehensive, goyeroraent-
wide cost principles to ensure '.flat
nonprofit Federal grantees and . .
contractors do not lutaeprccrtaitti
rands for lobbying activities. Thi«
principle is achieved by disallowing -Jii
recovery of lobbying costs in a a»aaa«r
consistent with the treatment undsr
Circular A-122 of other cosu which vs
diaailowtd on grounds of public pofc;-.
In adopting this revision. OMB does ooi
inland to discourage or penalize
nonprofit organizations iroa w
lobbying efforts ^vltfa thei* own non-
Federal funds. The sole putpcse 01
revision ia to require that those
be paid for *-vtth funda raised T=
sources and to ensure that cha
government does not subsidiza such
lobbying activities with appropriated
funda. In addition, this revision leeks.
for tat sake of auditors and auditees
both, to clarify definition* and thereby
to make) tht current provisiorj against
oat of funds for lobbying purposes both
easier to comply with and to aruorce.
Ia recant yttftt Ccneresa and the
Comptroilar Central have recognized
that tht use af Federal monies by
gnatttt and contractor! to engage in
. - 14. -
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Federal Register / Vol. 49. No. 83 / Friday.' April 27. 1984 / Notices
18263
lobbying Is inappropriate. The
voluminous comments OMB received on
the revision demonstrate that there is
little disagreement on this score. Use of
appropriated funds for lobbying diverts
scarce resources (torn the purpose for*
which the grant or contract was
awarded. By permitting such a use of its
funds, the government subsidizes the
lobbying efforts of its contractors aad
grantees. This improperly distorts the
political process, by favoring the
political expression of lorne—
organizations with contracts or grants-
relative to others, who must conduct
their political expression at their own
expense.
Government subsidization of certain
participants the debate over legislative
outcomes may contradict important
principles of government neutrality in
poiiticai debate, and use of Federal
funds for private lobbying can give the
appearance of Federal support of one
political position over another. As the
comments indicate, subsidizing such
lobbying can create misunderstanding
and interfere with the neutral.
aonpartisan administration of Federally-
funded programs. The revision seeks to
avoid the appearance that, by awarding
Federal grants, contracts, or other
agreements to organize dons engaged in
political advocacy on particular sides of
public issues, the government has
endorsed, fostered, or "prescribe(d] [at]
orthodox" a particular view on-such
issues. West Virginia State Board of
Education v. Banteas. 319 U.S. 924. MS
(1943).
Requiring grantees and contractors to
bear the costs of their own lobbying
efforts does not infringe upon their
constitutional rights. No person or group
has a' First Amendment right to receive
government funding for political
expression. As the Supreme Court has
recently emphasized in a unanimous
opinion, free speech does not mean
subsidized speech. The Federal
government "is not required by the First
Amendment to subsidize lobbying. * * *
We again reject the 'notion mat the First
Amendment rights are somehow not
fuily realized unless they are subsidized
by the State."' Rfgaa v. Taxation with
Resnseatatson of Washington. 103 S.Ct
1997. 2001 (1983).
In recent years, the problem of the use
of taxpayer funds for lobbying purposes
has become of increasing concern, and
steps have been taken in a variety of
different contexts to address the
problem. There has been increasing
public concern that limited grant and
contract resources should not be used in
projects that involve political
organizing.
Congress has responded to this
problem by adopting numerous
appropriations restrictions to address
some of the more flagrant abuses and
problems raised by lobbying activities
with Federal funds. Indeed, over die
past ten years, some 40-30 riders have
been attached to appropriations bills to
address different aspects of the problem.
These appropriations riders use many
different formulations, but have as a
common element prohibiting the use of
appropriated funds for publicity or
propaganda purposes designed to
support or defeat legislation. The
agencies affected by specific
appropriations riders include Defense.
the District of Columbia, the Legal
Services Corporation, and agencies
'covered by the State-Justice-Commerce
Appropriations Acts. For example, the
current Labcr-HHS-Education-Reiated
Agencies Appropriations Act. dealing
with agencies that dispense the large
proportion of grant funds, reads as
follows:
No part of any appropriation contained in
this Act thall be used to pay the salary or
expenses of any grant or contract recipient or
agency acting for inch recipient to engage in
any activity designed te influence lepaiafloa
or appropriations pending before the
Congress. (Section JOB. Pub. L 96-139.)
This provision has been construed by
the Justice Department to extend the
ban on grantee activities significantly
beyond the conduct of "grassroots"
campaigns. Moreover, as to many of the
appropriations riders which prohibit
agencies from using public funds for
their own lobying activities, dear
policies regarding grantee and'
contractor expenditures for lobbying
may be needed in order for the agencies
not to be in violation, albeit indirect, of
their statutory restrictions. Enforcement
of these appropriations provisions, and
of the consensus principle that Federal
funds should not be used to support
lobbying activities, has proved to be
very difficult because of the absence of
any dear definitions or standards for
determining which activities by grantees
and contractors violate the lobbying
restrictions.
Furthermore, when audits are
undertaken, the lack of dear standards
imposes substantial burdens on the
grantees. Auditors can have great
discretion and significant leverage over
the grantees in negotiations to determine
which factors should be induded in
allowable costs. If auditors decide to
inquire into lobbying activities.
nonprofit entities can be compelled to
provide elaborate factual backup from
their records to refute any cleims that
may bo raised. In light of the enormous
expansion of Inspector General staffs
and the sensitiviry of this issue.
significantly more auditing activity can
reasonably be expected in this area in
the future. Accordingly, the current
practices do not serve the current need
to assure that Federal funds are not
used for lobbying purposes and. as well.
impose potentially heavy burdens on
agencies, their auditors and the
nonprofit entities themselves.
As the Investigations Subccmmittee sf
the House Armed Services Committee
recently concluded:
' (T]here it a deficiency in die
appropriations acts prohibition of lobbying
with appropriated fuadi. A review at the
legislative history of the publiciry-
propaganda appropriation* acts resmcaon*
provides no definition of the critical iermi
•publicity' and •propaganda.' Thus, there
appears to be so Srm diaoncnon oerwecn u-e
conduct which it permissible and that whiea
is prohibited. Thus the clear signal from
Congress through the appropriations iawt
and other actions aae not been translated
into effective management contrail.
In the commercial field, several steps
recently have been taken to facilitate
the need to be sure that Federal funds
are not used for lobbying. For example:
• On December 18,1981. the
Department of Defense issued revisions
to its Defense Acquisition Regulation
(CAR), addressing for the first time the
issue of lobbying activities, and making
certain such costs unallowable under
Defense contracts.
• On April 27.1982 and October 22.
1982. Defense further toughened its rules
disallowing lobbying costs by
^)
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18264
Federal Register / Vol. 49. Mo. 83 / Friday. April 27. 1964 / Notices
the fonaar F?R lobbying cost pnnciple.
The Defense Acquisition Regulation
Council, however, issued a deviation so
that tlie former OAR lobbying cost
pnnuple continues^ be operative for
Defense contractors.
These initiatives, however, affect only
defense and civilian contracts with
commercial entities. No generally
applicable cost principle has been
issued to cover the Federal Funding of
lobbying under contracts and grants to
nonprofit organizations. These entities.
however, are in the same position with
respect to most Federal government cost
guidelines as profit-making grantees and
contractors, and the comments received
by OMB clearly and overwhelmingly
support the view that the same lobbying
cost principles should likewise appiy to
them. Therefore, in keeping with sound
management practices, it is important
that tie lobbying cost principles be
extended to these nonprofit entities and
harmonized to the maximum extent
practicable, with the principles already
applicable to commercial concerns.
Given the vagueness of the existing
A-12Z standards, the need for a clear
cost principle on lobbying for nonprofit
grantees was addressed explicitly by the
Comptroller General in September 1982.
after a GAO investigation of whether
funds under Title X of the Public Health
Services Act ware used to finance
lobbying activities or abortion-related
activities:
Clear Ftdtnl guidance t* needed both to
«tuur» that Title X ptegrast funds an not
used for lobbying tad to preclude
•janecMury controversy over whether
jrmntee* ue vioUoag Federal restrictions.
TJt* .•now to nv>*9 and stoke mon specific
die cott pnnvp/is applicant to oil fedtrttJ
fiancee* it iha uppropnatt auchoiuun to '
«A;»ve -Jim mat. GAO/HRD-SZ-106 (Sept
24. 1982) it 27 (empbtiu idded).
This revision thus addresses the major
area in which federal coat principles
have sot yet been adopted to ensure
that appropriated fund* are not used to
subsidize lobbying by Federal grantees
and contractors. This revision is
intended to provide lines of demarcation
to that nonprofit entities can know in
advance what is allowable. The revision
protects their Tint Amendment rights
and in significant respects strongly
advances their interests. By giving
nonprofit entities dear guidance and
limiting the bookkeeping work that can
be required to refute an auditor's claim
of unallowable costs, the revision
removes a potentially severe burden
from these entities, especially the
smaller and less well financed groups. In
addition, although the revision cannot
resolve in advance every problem which
may arise in this complex field, a
mechanism has been provided by which
nonprofit! may obtain advance rulings
whether certain costs are unallowable.
The revision is similar in critical
respects to the current Defense and FAR
procurement regulations, although—as
noted elsewhere in this premble—
provisions added in the past two yean
to the cost principles governing all
Federal contractors are far more
restrictive than the revision adoped
here. Since parallel revisions are being
issued for Circular A-122 and FAR sets
of cost principles, the present initiative
guarantees uniformity of lobbying cost
rules for both nonprofit and profit-
making recipients of Federal funds. This
principle of uniformity has been urged
by Congressional commenters and by
the GAO.
VL Principal Objections to the Proposal
A. Legal Authority
Numerous commenters suggested that
OMB lacks authority to issue this
revision to Circular A-122. Most of these
comments appear to have been based
upon a report of the Congressional
Research Service, which suggested that
this might be a potential legal issue but
ultimately reached no conclusion on the
matter. OMB. supported by the
Comptroller General, believes that its
legal authority to issue the amendment
is clear.
The responsibility for implementing
grant programs, including the power of
administration, has been delegated by
Congress to the various grant- and
contract-making agencies. It has long
been settled that the Federal
government may impose terms and
conditions upon grants and contracts it
awards, including those given to State or
local government instrumentalities. 5«e.
e.g.. King v. Smith, 392 U.S. 309 (1966).
Accordingly, those agencies have the
direct legal authority to establish cost
principles and. prior to the late 1970s.
did so in a piecemeal fashion without
coordinated government-wide
standards.
OMB's legal authority for establishing
cost principles derives from the
President's constitutional authority to
"take care that the laws be faithfully
executed." LT.S. Constitution. Article II.
Section 3: his authority under section
205(a) of the Federal Property and
Administrative Services Act 40 U.S.C
488(a): and from the general supervisory
responsibilities over the Executive
Branch vested by Congress in the
President and in OMB. In particular, in
its capacity as the President's managing
agent for the Executive Branch. OMB is
authorized by 31 U.S.C 1111(2) to assist
the President in improving economy and
efficiency .throughout the government by
developing plans for the improved
organization, coordination, and
management of the Executive Branch.
This revision constitutes an effort to
develop government-wide cost
principles that are uniform, to the
maximum extent practicable, and treat
similarly situated organizations alike.
The President assigned responsibility
for grants management *o OMB by
Executive Order No. 11541 jjuiy t. 1970J.
pursuant to Reorganization Plan No. I of
1970. 3 U.S.C. App. Subsequently, grants
management authority was transferred
to GSA by Executive Order No. 11717
[May 9.1973) and transferred back to
OMB by Executive Order No. 11393
(December 31.1975). Relevant statutory
authorities include section 209 of the
Budget and Accounting Act of 1921.31
U.S.C. 1111(1): and section 104 of the
Budget and Accounting Procedures Act
of 1950. 31 U.S.C 1111(2). Under these
and other general management
authorities. OMB may develop plans for
implementing better management with
"a view to efficient and economical
service" and may issue supplementary
interpretative guidelines "to promote
consistent and efficient use of
procurement contracts, grant
agreements, and cooperative
agreements."
In its capacity of exercising the
President's general management
functions over the Executive Branch.
OMB has the power to supervise and
direct the management activities of
Federal agencies. OMB has issued a
series of Circulars over the years in
discharging these delegated
responsibilities, and these Circulars
serve as one of the primary means of
informing the agencies how to exercise
their authority in administrative.and
managerial matters. The cost principles
set forth in Circular A-122 exemplify .
OMB's traditional budget and
management policy authority.
OMB Circulars are binding upon the
Executive agencies as a matter of
Presidential policy. Agencies, in mm.
incorporate the previsions and
requirements of applicable OMB
Circulars into grant and contract
agreements through regulations, grant or
contract terms, or other means. In :his
manner, the Circular provisions become
legally binding upon contractors and
grantees. Indeed, provisions of OMB
Circulars have been held legally
applicable to grantees even when the
grant-making agency has not explicitly
implemented the Circular. Qonaar
Corporation v. Metropolitan Atlanta -
Rapid Trenail Authority. 441 F. Supp.
1108.1172 {N.O. Ga. 1977J.
16
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Federal Register / Vol. 49. No. 83 / Fnday. April 27. ;984 / Notices
18265
This revision, tike the coat principles
disallowing advertising, fundraising.
entertainment and investment
management costs, is directly related to
(he efficient and economical ~
administration of grants, contracts, and .
other agreements. By prohibiting the use
of grant and contract monies for
lobbying (unless specifically authorized
by statute), funds can be directed
toward their proper uses, thereby
achieving greater public benefit As the
Comptroller General has noted. "The
cost principles applicable to all Federal
grantees is she appropriate mechanism
to achieve these ends [of ensuring that
Df ograffi Funds are not used for
lobbying]." GAO/HRD-U-IM
(September 24.1982). at 27.
As noted, the Comptroller General
believes that OMB has the dear legal ..
authority to issue the Circular
amendment published today, and
supports it
8. First Amendment Considerations
Some coounenten suggested that the
revision might under certain
•.circumstances, be construed as imposing
unconstitutional burdens on First
Amendment freedoms of speech.
association, and the right to petition
Congress. Most of these objections
appear to follow, in large measure, an
analysis of the proposed revision
prepared by the Congressional Research
Service (CRS) which, as indicated, noted
that constitutional questions might be •
raised but ultimately did not conclude
that the proposal was unconstitutional
in any respect Constitutional objections
to the revised November proposal were
sharply reduced, apparently in response
to the May 1983 decision of the Supreme
Court in Regan v. Taxation With
Representation of Washington. 103 S.
Ct. 1997. That case reemphasized that
nonprofit entities do not have a First
Amendment right to have their political
advocacy activities subsidized by the
Federal government and essentially
satisfies the principal constitutional
concerns raised during the comment
period. OMB. however, has carefully
reviewed the comments and. where
improvements in phrasing could b«
-made to eliminate ambiguity or provide
cianty, appropriate changes have been
made.
latent Underlying the Circular. Some
commenters suggested that the revision
was the product of an unconstitutional"
discriminatory purpose, an alleged
intent to "defund the left" Assuming.
arguendo. that the allegation is relevant
as a matter of law in overriding the
actual effect of the revision, this concent
is without foundation. As more fully.
explained in the November 1983 notice.
the intent behind the revision is
nondiscrimioatory, and its effects are
politically neutral It it designed, as a
matter of sound management practice,
to extend to nonprofit grantees and
contractors a cost reimbursement policy
already applicable to similarly situated
profit-making entitles. The revision is
intended only to ensure that Federal
funds are not used to subsidize lobbying
efforts. The revision is content neutral
and is not intended "to discourage or in
any way penalize organizations for
lobbying efforts conducted with their
own funds." 48 FR at 30880.
Furthermore, nothing in these neutral
accounting principles provides any basis
for concern chat they will be applied in
anything but an impartial objective
fashion. Accordingly, the revision
passes constitutional muster. Regan v.
Taxation With Representation of
Washington. 103 S. CL 1997, 2002-2003.
Qverbnadth. Some commenters
claimed that tho revision violates the
First Amendment because its provisions
an overbroad and not drafted
"precisely" and "narrowly" enough. For
example, the League of Women Voters
expressed concern that the language of
the revision somehow might require
"disclosures concerning the source of
funds for private lobbying and certain
other political activities." in violation of
its freedom of association and right of
privacy. • • •
Upon review of (ha comments, OMB
believes that the "overbreadth" claims
an defective. This is particularly so in
light of the elimination of the so-called
"tainting" theory, under which Federal
reimbursement would have bean
disallowed for the entire cost of any
supplies, equipment, or services of a
nonprofit organization used even
partially for lobbying or advocacy
activities. The November proposal and
this final version have dropped the
"tainting" approach in favor of a much
men narrowly crafted "allocation"
approach, in which only the actual
amounts expended an deemed
unalloweble—on amendment that man
than satisfies all overbnadth concerns.
Moreover, this allegation applies with
greater force to the current vague bar in
the Circular and to the statutory ban
earlier noted.
Vagueness. Other commanters
suggested that the proposed revision
was impenaissibly vague. For example.
the National Education Association
contended that "the revised proposal is
so ambiguous and vague that
organizations would not know how to
comply with them and OMB could
interpret them arbitrarily and apply --
them unequally," and the American
Friends Service Committee alleged that
"{tjhis (proposal) will tend to chill
advocacy efforts of organizations for
fear of jeopardizing Federal grants and .
contracts." Some commenters. including
the League of Women Voters, also
claimed that the proposal leaves
nonprofits with no better guidance on
unallowable costs than before.
Upon review of the comments. OMB
finds mesa claims wholly unpersuastve.
As noted above, the management
consideration driving this revision is the
desire to provide a clear, uniform
definition of unallowable activities, 10
that grantees and contractors will know
what is expected of them and can
conform their conduct to the guidelines.
and so that agencies and auditors will
have more explicit standards to which
to refer than are now available. The
suggestions about vagueness are wholly
speculative and without any real basis.
However, in order to avoid any poeiibte
ambiguity and provide explicit guidance
to nonprofit entities, the final revision
has been revised in several respects.
and a seetiou-by-section explanation of
the operation of the revision provided.
In particular, as described in detail
below, the proposed definitional phrase
"lobbying and related activities" has
been changed to "lobbying." and the
standard "costs associated with" term
has been used to clarify application of
subpangraphs a and b. Finally, section
(c)(5) of the proposal provides for
advance clarification procedures
between agencies and grantees, which
should further assist in the development
of a fair evolutionary process of
implementing the final revision and its
objective of limiting Federal
subsidization of lobbying.
RecordJteeping. Finally, some
commenters suggested that the
revision's reporting and recordkeeping
requirements somehow would burden or
<7hifl >i«» First Amendment rights of
nonprofit entities. These recordkeeping
requirements comply fully, however.
with the Supreme Court's decision in
Regan. *e* 103 S. CL at- 2000 n.6. and are
consistent with accepted accounting
principles. In fact they constitute one 31
the major factors which eliminates any
alleged potential for "unfettered .
administrative discretion" about which ,
other commenters, notably CRS.
objected These requirements have been
intentionally made less onerous and far
more explici; than those provided by
OMB management circulars in other
circumstances for other types of costs.
See the current Circular A-122. and
Circular A-llfc "Uniform
Administrative Requirements" for
nonprofit organizations, and compare
17
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18286
Fadaral Register / Vol. 49. No. 83 / Friday. April 27. 1964 / Notices
with i«ction c(4) of the revision. AJ
acted above, oae of OMB's ptiauy
goals b«i been to reduce the burden on
nonprofit entities during the audit
protest and :o reduce the amount of
bookkeeping maternal auditors may
demand In challenging the allowability
of '.heir lobbying costs.
The revision simply requires nonprofit
entities to 'maintain adequate records
to demonstrate that the determination of
cost] as being allowable or unallowable
pursuant to paragraph B21 complies
with ±t requirements of this Circular."
The paragraph does not cadi for separate
^establishment of the lobbying and non-
lobbying activities of an enaty. Indeed.
in the case of indirect-cost employees .
who spend 25% or less of their tune
engaging in lobbying, there is no
requirement thtt they maintain time
logs, calendars, or suailar records. The
grantee or contractor, in such instances.
exercises full discretion over its
recordkeeping activities.
la sum, the recordkeeping
requirements are lawful reasonable,
and by ao means burdensome relative to
other unallowable cost activities.
C Relationship With Intend Revenue.
Code Proviaioae
Some conuaenters suggested that the
Circular A-122 revision wee not
necessary because the internal Revenue
Code's restrictions regarding
"influencing legislation" by 501{c)(3)
organizations already provide sufficient
protection against lobbying abuse.
Others claimed that the revision could
create confusion or. needlessly increase
the paperwork burden on grantees and
contractors already regulated by the
Code provisions. Neither of these
arguments is valid.
The lobbying restrictions of the
Internal Revenue Code and Circular A-
• 122 serve entirely different functions.
The Cade has no direct bearing on
preventing the use of grantee funds for
lobbying purposes, because it governs
only the use of private funds and does
not concern the use of Federal monies.
The sole purpose of the Code previsions
Is to define the character and status of
organizations that will be entitled to
favorable tax treatment As long as
lobbying expenditures do not exceed a
certain portion of its revenues, an
organization is eligible for tax-exempt
status under the Code (assuming it also
meets the qualifying tests in other
areas}. The Code's lobbying provisions
determine only whether an organization
is sufficiently devoted to a public
purpose to justify preferential tax
treatment
The Code doee not address the
distinct question of whether Federal
grant monies should be used to
reimburse lobbying costs—the sole
problem addressed by the Circular A-
122 cost standards. The Code's lobbying
previsions thus do not preempt or
otherwise make unnecessary the
promulgation of cast standards in this
area. Indeed, the. fact that the Code's
lobbying provisions do not address the
use of grant monies for lobbying has
been implicitly recognized by Congress
on numerous occasions through
appropriation bill ntiers prohibiting such
expenditures. See. e.g.. Pub. L 97-377.
section 509; Pub. L 96-74. section 607.
: .The fact that certain expenditures by
nonprofit organizations are lawful under
the Code does not mean that Federal
grant monies should be spent for those
purposes. For example, the Code does
not prohibit tax-exempt organizations
from spending their revenues on
advertising or entertainment Circular
A-122, however, allows only certain
advertising costs, and disallows all
entertainment costs, from
reimbursement from Federal awards.
Moreover, the Code does not preclude
additional conditions from being
imposed on tax-exempt organizations.
For example. Section 503 of the Code
denies tax-exempt status in certain
instances to organizations using their
revenues for the private gain of
controlling individuals. That prevision
does not prevent disallowance of the
use of Federal grant monies for the
advancement of private partisan or
financial interests. This point is perhaps
beet highlighted by the fact that nothing
in the Code would prevent some
grantees from spending ail of their grant
funds for lobbying purposes.
Similarly, the fact that the Code and
other previsions of law regulate
lobbying activities of business firms
(e.g.. 28 US.C 162(e): Federal Election
Campaign Act 2 U.3.C 431-430) does
not mean that there should be no
provisions in the FAR regarding such
activities. Some members of the
business community suggested that any
previsions in Circular A-122 regarding
the unaUowability of lobbying
expenditures should be superseded by
definitions of lobbying set forth in the
Federal Regulation of Lobbying Act 2
U.S.C 281-270. The commenters have
cited no authority, however, to support
the view that the Code, lobbyist
registration laws, or any other statutes
obviate the propriety of the
government's assuring that Federal
grant and contract funds are spent only
for authorized purposes and. to the
degree feasible, that they be used to
provide direct goods and services to
intended beneficiaries.
Although the Code and Circular A-122
' lobbying provisions serve different.
purposes, in practice the information-
and accounting practices necessary to
satisfy these two authorities largely
overlap so that it will generally be
possible for both provisions to operate
harmoniously. The Code provides a set
of operational principles with which -
nonprofit organizations are already
familiar. Thus, wherever possible, the
final revision brings Circular A-122 into
greater conformity with those sections
of the Code dealing with aonprofn
entities. Where differences .remain.
Circular A-122 is generally narrower in
its application man the Code—end often
far narrower. Thus, nonprofit entities
should be able to adhere to the lobbying
cost standard using existing accounting
and bookkeeping systems.
While some commenters argued that
Circular A-122 is revised would require
all aonprofits to maintain multiple jets
of books, no commcnter was able to
specify why simultaneous compliance
with the Code and A-122 required such
double recordkeeping. As discussed in
the section concerning Paperwork
Reduction Act considerations, a
nonprofit organization maintaining
adequate financial records should be
able to comply fully with information
requests from the Internal Revenue
Service or its granting Federal agency.
Further, section c(4) of the revision
effectively exempts almost all
employees (thoee that spend less than
25% of their time on unallowable.
lobbying activities) from any
requirements to keep time logs.
calendars, or similar records relating to
indirect cost time.
0. Restricting the) Flow of Information
Many of the critical nonprofit
commenters asserted that it is crucial
for them to be allowed to "educate"
policymakers on pending legislation.
and vat the revtaion will impede their
testimony and other assistance to
legislators, by restricting the use of
Federal grant and contract funds for
lobbying activities. The National
Education Association, for example.
alleged that "the proposed revisions
would have an adverse effect an the
government and on nonprofit
organizations through discouraging
communication with Congress and
disallowing activities that are vitally-
important to nonprofit organizations."
Most iuch commenters seemed to
premise their comments on the ground
that the proposal would prevent them
from even attending legislative hearings
or analyzing legislation. Others claimed
that should Federal funds not be
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1826?
available, there would be no other
manner ia which legislator* could
receive thtir valuable information.
OMB has repeatedlystated that the
only effect of thtmisioa i» intended to
prevent Fsdtrai funds being expended
for lobbying purposes, and (hat nothinf
in the revision liniu tht ability of
nonprofit entities to lobby with thtir
own funds. OMB hai made every effort
to clarify tht terms of the rtviaioa so a*
to eliminate such misconceptions about
the scope of what it unallowable.
Heoce. various language changes have
been made in tht revision, especially in
section* *(3) and b(l). ft was never
intended, for example, that funding for
all attendant* at legislative hearings
would be prescribed, but only that that •
funding for attendance connected with
or in knowing preparation for a lobbying
effort would be precluded. The final
version removes uy doubt on this
score.
The revision will not restrict the
legitimate flow of factual information
requested by the legislators, woo an in •
the beet position to know what they
need to discharge their functions in our
system of government Even in the)
context of contractor and grantee
lobbying, section b(l) ha* been designed
to avoid such interference with formal
congressional hearing and normal
informational interchange processes.
E. Evidence of Confusion Regarding
Current Lobbying Restrictions /
Several commenters argued that too
few instances of the use of Federal
funds for lobbying activities had been
cited to justify the revision. However, a*
noted in the November proposal the .
number of adjudicated violations was
limited by enforcement difficulties, not
necessarily an absence of abuses.
Before the revision, it has been very
difficult for auditors to obtain evidence
of outright violation* or fraud that could
be prosecuted, or of mistake* in
application, so they could be corrected.
Such items were typically carried on the
book* as part of an organization's
indirect costs, and not broken out by
category.
While various statutes mandate that
taxpayer funds not be used for lobbying
on legislation and electioneering, and
while there is clear policy consensus .
that no Federal funds should be spent
for these purposes; the Inspectors
General have reported that effective
auditing of the use of Federal funds for
lobbying is not possible under the
existing Circular. For example, Charles
Dempeey. HUD's Inspector General and
Chairman of the Prevention Committee
of the President's Council on Integrity
and Efficiency, ha* stated that:
W* do not believe that iffecttve tudlttaf of
the use of Federal fund* for lobbying
purposes is possible under the current OMB
Circular A-121 Moreover, we do not beiiavs
that, gtviti the ourent Circular, it is possible
to know or otherwise sssess the extent to
which Ptderal Funds are used for lobbyist
purposes.
However, even with the current
auditing difficulties, a number of
instances have been uncovered in which
there is. at a »"»"»««^ confusion on the
part of agencies and grantees as to
allowable and unallowable costs in the
area of lobbying. Examples include:
• A Department of Education grantee
under the Women'* Educational Equity
Act Program recently conducted a two-
day conference in Washington, D.C
According to the conference program.
one afternoon was largely devoted to a
discussion of "political action and
participation." The other afternoon was
devoted in its entirety to "a visit to
Capitol Hill and meeting with
legislators." The program itself noted.
that the conference had been funded by
the Department of Education. .
• A September 1982 GAO study of
grantees under Title X of the Public
Health Service Act audited
representative grantees, and found that
some incurred "expenses that, in our
opinion, raised questions as to
adherence with Federal lobbying
restrictions." GAO/HRD-82-lOft. .
• GAO found that e mass
transportation grantee prepared and
distribured a newsletter, a portion of
which urged its reader* to write to the
Congress to support continued funding.
of a "People Mover Project" Tht agency
was doeatfd rvsponaibia for not
informing its grantees that expenditures
of gnnt funds for this purpose were not
permissible. (I>-202 973. November J.
1981.).
As noted, the GAO ia September 1982.
recommended a coat circular revision on
lobbying. And, aa further noted, the
current rvvsson has been prepared in
active consultation with the GAO.
which supports it The revision will now
make it possible for the Federal
government to better ensure that
appropriated monies reach their proper
objective, while limiting the amount of
documentation auditors may demand
from nonprofit entities in auditing and
negotiating situations. Similarly, for the
first time, organizations will have
clarified responsibilities and incentives
for proper documentation, which will
benefit both the private sector and the
government.
F. The) Proposed Revision Wes Not
Sufficiently Restrictive
Many commenters argued thai the
proposed revision was not sufficiently
restrictive to curb ebuses in this ares.
For example, the American Legislative
Exchange Council, the largest individual
membership organization of state
legislators, argued that the revised
proposal would not achieve the
necessary fundamental reforms. "There
is a tremendous concern across the
country that some groups are using
Federal dollar* to advance their own
narrow political interests before
Congress and State legislatures * * *
we believe these regulations should be
stronger in requiring a strict accounting
of Federal grant money."
Similarly. Taxpayers for Less
Government recommended broadening
the definition of unaiioweble lobbying '.o
include the lobbying of several types of
government entities not covered under
the November proposal, such as school
boards and independent regulatory
commissions. It also recommended that
all forms of legislation be explicitly
.covered, including bills, appropriations.
declarations, ratifications and calls for
conventions. It also contended that
"fcjourt cases on any of these areas
should also be prohibited with the use of
tax funds: if a group has a legal dispute.
the taxpayer should not have to
underwrite the extensive litigation
process."
The Stockholder Sovereignty Society
advocated several changes to tighten the
revision: (1) Assess doable or treble
damages against violators: (2) debar
violators from participating for five
yean in the particular program from
which funds were diverted for lobbying
or related activities: and (3) debar any
parent subsidiary, or other controlled
organization of violators.
Many other commenters opposed the
omission of local level lobbying from the
revision, contending that there is.no '
rational basis for funding one level of
lobbying (local) when another (Federal]
is made unallowable. Many also argued
that the revised Circular should reflect
the principle of "preemption." For
example, the United States Business and
Industrial Council stated "(nonprofit
organizations should be required to
choose between political activism and
Federal subsidies. Preemption would
allow nonprofit* to lobby, but only on
condition that they disavow Federal
funds." Such an approach would be far
more restrictive than OMB's January
1983 proposal
Braddock Publications argued that
with adoption of the allocation method.
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Federal Register / Vol. 49. No. 83 / Friday. April 27, 1964 / Notices
the 25% reeordkeeping rule created an
unfortunate loophole. "A '10% rule'
would bi more reasonable and would
i till address the concerns of tfiose
groups which iobby very little."
OMB has carefully considered but not
accepted these suggestions. In OMB's
judgment, the November 1983 revision.
as modified in this final publication.
constitutes a major, workable
management initiative which represents
the best achievable compromise among
the interested parties, while fully
protecting their interests. OMB also
considered and rejected more extensive
"sunshine" provisions which would
have called for full disclosure by
recipient organizations of detailed
information concerning their personnel
public policy positions, affiliations of
officers and directors, publications, and
other such information. OMB believes
such reporting requirements .would
exceed those necessary to achieve the
purpose of this revision to ensure that
Federally appropriated funds are not
used for lobbying activities by grantees
and contractors.
vn. Analysis of Comments and
Resulting Change* to Proposal
The revision creates a new paragraph
in Attachment 8 to Circular A-122. to be
called "821 Lobbying." Paragraph 821
consists of three subparagraphs, which
in tun contain a total of thirteen
lections.
A. Unallowable Lobbying—
Subparagraph a
enforcement of the current restrictions
on tax-funded lobbying has been
hampered by the lack of a clear
definition of what activities are
unallowable. In constructing the
definitions and standards in this
revision. OMB has drawn where
appropriate upon experience with the
Internal Revenue Code, statutory
provisions. Defense. CSA, and NASA
procurement regulations, and similar
authorities. Great care has ben taken to
avoid prohibiting reimbursement for
activities that are legitimately necessary
;o fulfill the purposes of a grant or
contract •
Subparagraph a defines Sve
categories of lobbying activities that are
unallowable for reimbursement It
should he read in conjunction with
subparagraph b. which establishes
exceotions to these provisions.
8. Electioneering— Sections a (I) and
Section a(l) makes unallowable
certain electioneering activities at the
federal state, or local level*. It applies
both to referenda, initiatives and similar
campaigns..as well as to elections of
candidatts to office. The restrictions
should be familiar to nonprofit
organizations, since they are prohibited
by 28 U.S.C 50l(c}(3). This section is
narrower than the Code in one respect
however, because it is confined to
"contributions, endorsements, publicity.
or similar activity," while the Code
broadly prohibits "participating] or
intervening], directly or
indirectly' • '."
Section a(2] makes unallowable Che
financial or administrative support of
political entities—including political
parties, campaigns, political action
committees, or other organizations—for
the purpose of influencing elections.
Thus, it bars indirect support of
electioneering activities through
intermediaries. This section also follows
the definition of disqualifying activities
• under the Internal Revenue Code.
Very few commenters disagreed with
the principle that use of Federal funds
for electioneering and political activities
should be disallowed. Some, however.
argued against the "disallowance of •
costs associated with participation in
referenda, initiatives, and similar
procedures." For instance, the Catholic
Social Service of Santa Clara asserted
that lobbying expenditures should be
allowable if incurred for an educational
purpose. OMB agree* that the cost of
educational activities should be
allowable if they are educational and
nothing more. But if the activities go
further than helping persona accumulate
data or comprehend its meaning, and
involve partisan political activity or
steps designed to influence the outcome
of an election, they constitute activity
that should not receive Federal funding.
The American Jewish Congress also
argued that section a(l) would severely
restrict political campaign involvement
by organizations classified under the
Internal Revenue Code as Wl(c)(4) ,
groups, which face "'"'»"•' restrictions
as to their political involvement As
acted above, the Code's restrictions
serve merely to classify organizations
for purposes of taxability. By contrast
the cost principles established through
Circular A-122—including this
revision—define permissable uses of
Federal grant or contract money,
without regard to the organization's tax
status. The revision doe* not in any
respect limit an organization's right to
engage in campaign activities with its
own funds.'
C Attempts To Inflame* Legislation—
Sections a(3) and a(4)
Section a(3) make* unallowable the
cost* of attempts to influence Federal or
state legislation through contact* with
government officials. This section - .
confines the reach of unallowable
lobbying to legislative deciaionmaking.
aad does not apply to Executive Branch
lobbying, with the exception of attempts
to influence a decision to sign or veto
legislation, and attempts to use state
and local officials as conduits for
grantee and contractor lobbying of
Congress or state legislatures. The
coverage of section a(3) is more limited •
than the current prohibitions in the'
Internal Revenue Code, and the FAR. ;n
that it does not apply to legislative
lobbying at the local level (e.g.. matters
such as obtaining zoning changes, police
protection, or permits). Since there is no
rigorous separation between legislative
and executive authority at the local
level it would be difficult to construe: or
enforce a rule regarding legislative
lobbying at that level
Efforts to influence state and local
officials to accomplish the lobbying
activities defined in section a(3) are
likewise unallowable. Thus, the Federal
government will not reimburse an
organization for the cost of meeting with
mayors or city council representatives if
the purpose is to convince them to lobby
the Congress for legislation that the
grantee or contractor favors.
The comments raised few objections
to the basic soundness of the
proscriptions in section a(3). although
some argued that the broad coverage of
the January 1983 proposal was more
appropriate than the more-limited scope
of the November proposal. The
Conservative Caucus suggested that the
costs of attempts to influence
rulemakings (as well as legislation) and
of local level lobbying should be added
to the list of unallowable activities.
Similarly, the Fairness Committee
argued that reimbursement should not
be allowed for any Executive Branch
lobbying, and not simply decisions to
sign or veto legislation. After careful
consideration. OMB has decided not to
expand the scope of this section.
Rulemakings frequently have direct
implications for a grantee's technical
performance of its award. Furthermore.
recipient organizations are iikeiy to
require regular contacts with Executive
ofkials in the ordinary course of
tun'giffg and performing the terms of
the grant or contract. As stated ibov«.
this is even more certain to be 'Jie case
at the local level The granting or
witholding of Executive consent :o a bill
is as integral part of the legislative
process, however, so that this limitation
on Executive lobbying is appropriate.
One commenter, the Concho Valley
Canter for Human Development '
objected that "prohibiting lobbying at
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Federal Register / Vol. 49. No. 33 / Friday. April 27. 1984 / Notices
18269
the state level would interfere with
business that U more appropriately tb«
purview of the nate legislature." Ample
ailowanca is made in section b(2) of this
revision for activities at the state level
affecting the authority of an entity or the
costs of performing Federal grants or
contracts. Likewise, as recognized in
section b(3). specific grant or contract
provisions may, pursuant to Federal
statutory law. make allowable certain
lobbying with grant or contract funds.
Apart from these exceptions, it is not the
business of the Federal Government to
subsidize lobbying of state legislatures.
Section a(4) deals with grass roots
lobbying, and is applicable only to grass
roots campaigns concerning legislation.
Similar provisions an found in many
appropriation* riders and have been
interpreted and applied by GAO on
many occasions. The definition of grass
roots lobbying in section a(4j. however.
is less inclusive than that of the Internal
Revenue Code, tt is limited to efforts to
obtain concerted actions on the put of
the public and. unlike the Coda, it does
ot include attempts "to affect the
opinion* of the general public" if such
attempts are not intended or designed in
such fashion as to have Che reasonably
foreseeable consequence of leading to .
concerted action. 28 U.S.C
4911(d)(l)(A). The narrower reach of this
section is consistent with GAO's
interpretation of the prohibitions in
appropriations riders on the use of funds
for "publicity or propaganda." Sw. a.g.,
Comp. Gen. Op. 3-202975 (Nov. 3.1981).
It was suggested that use of the term
"legislation pending." in sections a(3)
and a(4) of the proposal was ambiguous
and questioned whether that phrase
applied only to bills formally introduced
before a deliberative assembly, or
included legislation in the process of
development In response to that
concern, these sections have been
amended to specify that they apply
when the activity in question constitutes
as attempt to influence either "the
introduction of federal or state
legislation" or "the enactment or
modification of any pending Federal or
state legislation." This language.
especially when considered in
conjunction with the phrase "costs
associated with" which commences
subparagraph a. should clarify that the -
costs of preparing, instigating or urging
legislation not yet formally introduced
are just as unallowable as lobbying with
regard to bills that have already been •
introduced. , N
Several commenters. including CARE
and the National Association of
Manufacturers, expressed concern that
costs of an activity not originally * •
intended to promote legislative
advocacy might be disallowed, after the
fact, if it were later discovered that the
activity or its proximate effects did in
fact lead to the development and
promulgation of legislation. The revision
addresses this problem. The limitation
on "costs associated with ' * ' any
attempt to influence ' ' * legislation."
as used in sections a(3] and a(4).
includes costs which support or
facilitate pursuing or developing
legislation before its formal
introduction. However, the key phrase
in the final version of sections a(3) and
a(4) is "attempt to." This phrase requires
intent or conduct with the reasonably
foreseeable consequence of initiating
legislative action, or to support or
facilitate such ongoing action, in order
for its actions to be categorized as
"unallowable."
The language of sections a(3) and a(4)
has been amended in minor respects so
that it tracks more closely those
provisions of the Internal Revenue Code
which establish the activities that
constitute "'"fl"«*«"g legislation."
Section a(3) tracks 28 U.S.C.
4911(d)(l](B), which prohibits "an
attempt to influence any [Federal state
or local] legislation through
communication with any member or
'employee of a legislative body, or with
any government official or employee
who may participate in the formulation
of the legislation," Similarly, section a(4)
follows 28 U.S.C Wll(d)(l)(A). which '
defines "^ft"«*»ging legislation" to
include "any attempt to influence aay
[Federal, state, or local] legislation
through any attempt to affect the
opinions of the general public or aay
segment thereof." As previously noted.
sections e{3) and a(4) are narrower than
the comparable Code previsions in
several respects.
D, Lqulattn Liaison—section afS)
Section a(9) makes unallowable the
cost of legislative liaison activities when
they are in furtherance of unallowable
activities aa denned in sections e(lH4).
While a key purpoae of aa
organization's "legislative liaison"
activity may be to direct and prepare for
what has been defined in this revision
aa unallowable lobbying, it may also
serve other functions that this revision
does not make unallowable. By contrast
under the current Defense Department
Supplement to the FAX. ail legislative
liaison activities are deemed
unallowable.
OMB received more technical
comments on this section than any other
pert of the proposal Some commenters
argued thai, since the Internal Revenue
Code does not disallow "legislative ,
liaison" for purposes of determining
organizations' tax-«xempt stems, neither
should Circular A-12Z However, the IRS
does not exempt legislative liaison
activities Cram treatment as lobbying—it
merely does not recognize legislative
liaison as a separate category of
lobbying. Legislative liaison activities
which, in the language of section a(5),
were "in support of or in knowing
preparation for an effort to engage in'
unallowable lobbying" would be
covered by the IRS bar. In any event.
however, and as discussed above, the
revision is concerned not with
determining the tax status of entities.
but with the proper use of Federal funds
by recipient organizations. Use of the
term "legislative liaison" in section
a(5p—in its present narrow sense—can
now not excuse or mask lobbying
activities by grantees or contractors.
Many other commenters argued that
the proposed section a(5) was
ambiguous. In particular, they objected
that the compound effect of prohibiting
"legislative liaison'' contributing to
support "lobbying and related activity"
was vague, and that the proposal was
difficult to construe because it employed
a double negative—that is. all
"legislative liaison" costs were
unallowable unless the activity was
unrelated to lobbying. The anal version
of section a(5) has been revised to
• accommodate these concerns. The new
language provides that "legislative
liaison" is unallowable only "when such
activities are carried on in support of or
, in knowing preparation for an effort to
' engage in unallowable lobbying."
The "knowing preparation"
requirement in the final reviaon should
avoid unintended retroactivity problems
by not permitting auditors to
automatically disallow legislative
liaison coats in every instance where
they are associated with later efforts at
lobbying. While responsibility for
establishing the ellowability of costs
rests, here aa in all aspects of cost
reimbursement with-the parties seeking
it the "knowing preparation" standard ,
of section a(S) is a particularly favorable
one for grantees and contractors. Thus,
only those legislative liaison activities
which, from their timing and subject
matter, can reasonably be inferred to
have had a clearly forseeeble link with
later lobbying fall within the "knowing
preparation" standard of section a(S).
Finally, it should be noted in
connection with section a(S) that the
term "costs associated with." which
commences subparagraph a. is fully
applicable. This means that the
proscription in section a(5) extends not
only to costs directly attributable to
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Federal Register / Vol. 49, No. 33 / Friday. April 27. 1984 / Notices
perforating • "legislative liaison"
activity, but also to costs that support or
facilitate its performance Likewise, the
technical status of a piece of legislation
(i.e.. whether it is formally introduced.
referred or enrolled} is not dispositive of
the issue whether the costs of
"legislative liaison activities" are
unallowable withia the meaning of
section a(5).
£ Exceptions to Unallowable
Lobbying—Subparagnpfi *
Subpangraph b contains three
exceptions to activities disallowed
under sufaparagnph a. The
subparagraph does not necessarily make
the costs of these activities allowable;'
ailowability or unallowability of such
coats will be determined by the terms of
the grant, contract or other agreement
involved. Circular A-122 does not
authorize costs or expenditures: it
merely limits the ailowability of costs or
expenditures.
Some commenters noted that the use
of the term "not unallowable" in the
introductory clause to this subparagraph
iA the November proposal might indicate
a one legal distinction which grassroots
volunteers would be unlikely to
comprehend or which would lead to
needless confusion. For clarity, the
introduction of subparagraph b has
accordingly been modified to provide
that "the following activities are
excepted from the coverage of
subparagraph a." For this reason.
activities which are not defined as
lobbying by subparagraph a, «.£.
informational communications by
organizations' with its members or the
distribution by organizations of
nonpartisan analyses, are aot set forth
as separate sections of lufapangraph b.
To the extent that thoee. or any other
activities, otherwise fall within the
definitional terms of any section of
subpangrapb a. they are deemed
unallowable unless they fail within the
exceptions defined by subparagraph b.
F. Legislative Requests for Technical
and Factual Informatioa—Section bflj
Section b(l) exempts from
stibparagraph a technical JtH factual
presentations to a legislative audience
on a topic directly related to grant or
contract performance and offered upon
a documented request even though the
presentation would otherwise constitute
unallowable lobbying. Since contacts
with legislative sources are not made
unallowable in the first place unleea
they are for purposes of influencing
legislation, this exception is relevant
only to those legislative-contacts made
unallowable under section a(3). The
exception is meant to fulfill the specific
informational needs of legislatures, and
members and staffs thereof, and has
. been revised extensively to reflect
concents expressed in the comments
and by members of the interested
Congressional committees.
The term "technical advice or
assistance," used in the November 1963
proposal to define the scope of the
exception, has been changed to provide
that costs of rendering "technical and
factual presentation of information"
may be excepted. The term "factual"
waa added after "technical" to clarify
that to be reimbursable, the services
rendered in a section b(l) situation must
be overridingly informational in purpose
and content and not advocatory.
However, the fact that an advocatory
conclusion is reached does aot in itself
make the presentation unallowable. As
previously indicated, this exception will
avoid separate accountings and
disallowances for each kernel of.
information provided in a lobbying
effort and will restrict the exception to
"presentation{aj" which are in fact and
which would be dearly seen as
"technical and factual" in character. --
This change will allow and advocatory
conclusion to be communicated with no •
disallowance for the time and effort
involved in preparing or
the conclusion, provided of course that it
cleariy *""^ naturally flows from the
technical *"^ factual date presented.
and is a distinctly minor aspect of the
overall presentation. In addition, the
lobbying effort excepted by section b(l)
is confined to information on a topic
directly related to the performance of a
grant contract or other agreement
A requirement that the presentation of
such information is to be provided
through "hearing testimony, statements
or letters" also has been sdded to the
scope provision, in response to a
Congressional suggestion. This change
helps clarify that with the exception of
travel meals and lodging coats in
connection with a(3) lobbying, such
Information need not necessarily be
tendered in formal testimony to fell
withia this exception.
Discussions with Congressional staffs
revealed concerns that legislators'
routine business of information
• gathering in connection with hearings.
drafting bills and other legislative
functions might be hampered if the types
of requests sufficient to invoke the/
section b(l) exception did not include
oral requests, especially by telephone.
Accordingly, the condition that the
request be "written" has been changed
to a requirement that it be
"documented," The final version of
section b(l) de-emphasizes the necessity
for stringent request documentation
requirements. The section also now
states explicitly that the technical
information exception is invoked by
notices in the Caagnssional Record
requesting testimony or statements for
the record at regularly scheduled
hearings. Some persons suggested that
some of the routine information*
gathering functions of the legislative
bodies might be disrupted if such
notices and responses to them were act
specifically included in section b(l). As
indicated below, for its costs (o be
excepted. the presentation must not only
be of a "technical and factual" nature.
but must also be "readily obtainable
and can be readily put in deliverable
form."
Several commenters expressed
uncertainty about the requirement that.
to fall within the exception, technical
advice or assistance to legislative
bodies must be "in response to a
specific' ' ' request" The term
"specific" has therefore been deleted
from this final version of section b(l).
This change does not affect the
underlying intent that requests sufficient
to invoke this exception must be bona
fide, may not be open-ended or
indeterminate, and must not be made for
the purpose of circumventing the
subparagraph a restrictions.
Section b(l) now requires that the
request for information be "made by the
recipient member, legislative body or
subdivision, or e cognizant staff member
thereof This language, articulating a
condition implicit in the November 1983
version, makes explicit that the person
or committee requesting the information
should be the recipient so that for
example, a request by one employee of
the legislative branch could not be
advanced as justification for allowing
the costs of a lobbying mailing to each
Member of Congress.
The term "cognizant staff member"
has been inserted In response to
Congressional comments that the
November 1983 language might require
personal attention by legislators to each
request for factual or technical
information, f-initfrij the request from a
staff member to that person's
"cognizance" of the matters for which
the information is sought is intended to
ensure that the request is e bona fide
request for information of a truly factual
and technical nature, aot otherwise
readily available to the legislators.
When the above changes were made
to greatly ease the implementation of
the exception, it became necessary to
put some limit on the costs that grantees
and contractors could charge the
Federal government when undertaking
22
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Federal Register / Vol. 49. No. 83 / Friday. April 27. 1984 / Notices
18271
such lobbying. With the elimination of
the requirement far a written request
and the addition of the provision
allowing Congressional Record notices
•o suffice for providing such' information
at government expense, a corresponding
potential was created for unduly
substantial Federal financing of
lobbying.
In order to ensure that the information
and its preparation are the true bases of
the cost section b(l) has.been revised to
require that the response oust be
information chat "is readily obtainable
and can be put in readily deliverable
form." (This provision is intended to
restrict and relate to the costs of
acquisition and delivery of information.
not the time involved in responding co.
requests.) Provision of such assistance
justifies invoking the exception only
when the information is known or
obtainable—and in such form as to be
readily produced and delivered. The
section b(l) exception was included in
order that legislators could draw on the
expertise and data possessed by
nonprofit organizations—even while
offered as part of a lobbying effort This
section, however, does not justify paying
for research projects or otherwise
incurring significant charges to grants or
contracts to develop information not
readily at hand. .
Likewise, in order to limit Federal
payment for lobbying to technical and
factual presentation* most likely to
produce expert information not readily
obtainable elsewhere, the further
requirement has been added that the
presentation be linked to information
"derived from the performance of a
grant contract or other agreement "This
provision permits the exception to be
invoked for information not only derived
from grants or contracts presently in
effect but also information on topics
directly related to grant or contract
performance. Nonetheless, a direct.
nexus between the topic of a grant
contract or other agreement and the
technical and factual presentation will
be required to be shown.
While the revision seeks to maximize
the free flow of information from
Federal fund recipients to Congress, this
does not mean to allow grant funds to
pay for lobbying trips to Washington
simply because part of that trip was
devoted to delivering information to a
staff member, or delivering essentially.
unsolicited statements'or testimony to a
Committee hearing.
To deal with this problem, the
revision provides that Federally-
reimbursable costs under this exception
could not include travel lodging or meal
costs, except when incurred for the
purpose of providing Committee hearing-
testimony upon written request for a
technical and factual presentation. To
help ensure that the Federal Sauting of
lobbying trips to Washington if limited
to those which Congress deems
necessary to its decision-making, the
revision provides that these otherwise
restricted coats (travel, lodging and
meals) can only be "Incurred to offer
testimony at a regularly scheduled
Congressional hearing pursuant 13 a
written request for such presentation
. made by the Chairman or Ranking
Minority Member of the Committee or
Subcommittee conducting such hearing."
To the degree possible, the cost of
providing information requested by
legislators should be paid for out of the
legislative budget Both houses of the
Congress have rules providing'for •-
payment of expenses relating to
Congressional testimony. [S«*. Senate
Resolution M8. 96-2: House Rule 33.) '
The American Civil Liberties Union
challenged the entire section b(l)
exception on the grounds that linking
the exception to a special legislative
invitation constitutes an impermissible
regulation of free speech on the basis of
content The reimbursement provisions
set forth in section b{l) do not
discriminate against any person's
speech but turn instead on the type of
assistance rendered. Under Sagoo, the
Supreme Court has ruled that no entity
has a right to have its speech subsidized
with Federal funds. Thus, it is
constitutional to establish general cost
guidelines to clarify the types of
lobbying for which the government will
provide reimbursement Indeed, this
section is based upon a similar
provision in the Internal Revenue Coda.
it bears repeating that nothing in this
revision prohibits grantees or
contractors from conducting any form of
lobbying or making any kind of
communication to Congress they wish.
as long as they do so with their own •
funds.
G. Stat» Ltvfl Lobbying Rfiatfd to
PotfotsiMUiGt of Gfont or CoofPUtit
Section b(2)
Section b(2) exempts lobbying
otherwise unallowable under section
a(3) to influence state legislation in
order' to directly reduce the cost or to
avoid impairment of the organization's
authority to perform a grant contract or
other agreement Such lobbying la
permitted because it can directly benefit
the Federal government by helping
minimi™ the coats of award ~
performance. The exception does not
however, permit the use of Federal
funds to lobby state legislatures to
promote an organization's ideological
objectives merely because those
objectives are consonant with the
purposes of the grant or contract.
A primary concern for several
national organizations that commented
on this proposal was the problem of
determining how closely legislation
must directly affect the performance of a
grant or contract in order to fall within
the proposed exception. A related
concern was the possibility that an
activity could serve multiple purposes.
some of which would and some of which
would not •'directly relate" to the
organization's grant mission.
In the final version, the term "directly
affecting" has been deleted, and other
changes made to the language to clarify
the precise scope of the exception. Thus.
. the lobbying affected by the exception is
specified to be" only that made
unallowable by section a(3).
Additionally, the phrase "at the state
level" was deleted in favor .of '.he
greater clarity provided by the phrase
"to influence state legislation." Finally.
the phrase "or related activity"
after"!obbying" has been dropped.
consistent with changes throughout the
revision.
The most significant substantive
change made to this section was.
deletion of the phrase "ability of the
organization." which several
commentors argued was far too broad.
For example, the .ability of the
organization" to perform a grant
contract or other agreement could be
construed to include those secondary.
tangential, or speculative aspects of the
activity that the November 1983
preamble indicated did not fit properly
within the exception. 48 FR at 5066S.
OMB has deleted this language and
replaced it with a reference to an
organization's basic "authority" to
perform the activity, thus eliminating the
potentially overbroad applications that
could be associated with the term
"ability." The potential for such abuse is
made evident by the incident described
below;
ANNAPOLIS. March 7—Administrator! of
two coBmmity~beMQ pro^vu .or the
mentally retarded led several hundred dients
in a d«Bpn*traaon hire today m lupport af
biiia that would raite employes' ieianei-«nd
tximpt their aifanizafioni from *tate
pracureraeat laws ' ' *
{The deounemaan organizer) seid that ill
partopaflii in today's demotuvation had
beea "educated iateniiveiy" about the rvaaoe
for the detMtuntton and had •licted to
cone, although soae ought have forgotten by
the tteu they arrived he taid * • •
Deawoairaiioa organizers defended Use
tactic laying the biila. if approved. «ni!
directly affect the clients by UBpravwa '.he
quality of can they receive • • '[See.
WatAiaften Pott March 11984. pp. CL CS.|
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Federal Register / Vol. 49. No. 83 / Friday, April 27. 1984 / Votices
Undtr the November 1983 proposal, a
strained argument could be mad* under
the concept of "ability to perform" that
the lobbying on the bills described
above should fit within the exemption—
a wholly unintended and inappropriate
result By focusing on an organization's
'authority" instead of its "ability" to
perform, the revised language should
eliminate any confusion as to what was
intended by the exception. Moreover, by
modifying the reference to "cost" to
include only cost reductions, the revised
language precludes lobbying for higher
salaries and reflects the point made in
the November 1983 preamble, that the
exception is intended to allow lobbying
for lower costs or belter performance of
• grants or contracts. These changes
guarantee that the only lobbying costs
reimbursable under the exception will
be those that relate to the organization's
direct performance of the grant or
contract in the most cost-efficient
manner possible, or its very authority to
perform the grant or contract
A state waiver clause was added to
the November 1983 notice in response to
concerns raised by some nonprofit
organizations. That clause would have
permitted states to make Federally
reimbursable the costs of all state
lobbying by their Federally-funded
subgnntees. Upon further review.
however, the clause was determined to
be superfluous, and potentially
troublesome for several reasons. Some
nonprofit commenters found the
exception confusing* subject to partisan
political pressures, and a needless cause
of complexity for grant rules. Under
aone of Circular A-122's other SO cost
categories do states have the right to
determine which costs will be eligible
for federal reimbursement Furthermore.
any lobbying "to influence State
legislation in order to directly reduce the
cost or to avoid material impairment of
the organization's authority to perform
the grant contract or other agreement."
is already excepted by the remainder of
section b(2).
H. Lobbying Authorized by Statute—
Section b(3)
Section b(3) exempts any activity
specifically authorized by statute to be
undertaken with funds from Federal
grants, contracts, or other agreements.
This technical section reflects that the
provisions of this Circular do not
override statutory law. Only minor
wording changes—with no change of
substance—were made from the
wording of this provision in the
November proposal.
/. Exceptions Deleted from November
Proposal
Section c(2)*ia the November 1983
proposal specified that communications
with Executive Branch officials would
not be unallowable, with two exceptions
now set out in section a(3): (1} To
influence a decision to sign or veto
legislation, or {2} to influence state or
local officials to serve as conduits for
unallowable lobbying activities. This
section had been inserted solely for the
purpose of clarifying that the only
Executive Branch communications
regulated by the revision an those
relating to signing or vetoing legislation.
or serving as a lobbying conduit
On the other hand, it is not intended
that proscriptions should be created by
implication from the fact that a type of
activity is not specifically excepted in
subparagnph b. Hence, section c(2) has
been omitted entirely, since the only
Executive Branch contacts unallowable
in the first place are those dealing with
a decision to sign or veto enrolled bills.
as specified in section a(3). As indicated
by the new language introducing
subparagnph b, the final version of the
subparagnph contains only exceptions
to activities which are otherwise
unallowable.
Section c(3] of the November proposal
also has been deleted, since other
provisions of the revision make it
superfluous. This section concerned the
application of the "tainting" principle of
the faaury proposal which was
eliminated in the November proposal
and replaced by the current proportional
•'allocation" principle. The inclusion of
section c(3) in the November revision
was inadvertent and has been corrected.
/. Accounting Treatment of Unallowable
Cotti—Siibparagraph c.
As with the Federal Acquisition
Regulation and as is already the ease
under Circular A-122's general rules for
unallowable costs, the costs identified
as unallowable by this revision include
not only costs of the direct activity itself
but also the costs of other activities
supporting that activity. For example, if a
lobbyist spends four hours lobbying the
Congress and an additional eight hours
in study, consultation, and preparation
for the lobying. the full twelve hours.
with the cost of any support services
and any other costs attributable to the
lobbying activity, are disallowed.
As emphasized in the comment
published with the text of the November
proposal only the portion of those cost
items allocable to the lobbying activity
is unallowable. Thus, if an employee
spends 60% of his time on lobbying
activities and 40% on Federal gnat
activities, 40% of the salary may be
allocated to the grant This approach is
consistent with the FAR lobbying cost
treatment provision, as well as with the
traditional accounting method of
prorating costs between allowable and
unallowable activities.
OMB considered and rejected an
alternative method of allocating costs of
items used for both lobbying activities
and grant or contract purposes, namely,
the concept that no Federal money can
be used to pay for any portion of a cost
item used for lobbying activities: (1) In
any way, or (2) over 3% of the time. The
OMB proposal published in January '.983
followed this stricter approach.
Commenters argued that it would
increase the cost of performing Federal
grants and contracts by effectively
requiring them to separate their
lobbying activities from their grant or
contract activities and could also lead to
inefficient duplication of equipment ana
facilities. They also argued :hat it would
burden the First Amendment rights of
contractors and grantees because
engaging in lobbying activities could
result in otherwise legitimate costs
being disallowed. As set forth in the
November notice. OMB has adopted a
different approach which alleviates
these concents and serves the goal of
assuring government neutrality by
disallowing reimbursement of Federally
appropriated funds used for certain
types of lobbying.
K. ladinet Cast Rate Proposal—-section
efl}
Subparagnph c establishes an
administrative framework for the overall
revision. Section c(l) follows current
cost allocation principles familiar to
grantees and contractors and
establishes a general format similar :o
that now applicable to comparable
unallowable activities.
Indirect cost rate negotiations are
conducted between an organization and
a single cognizant agency on an
organization-by-organization. rather
than on a gnnt-by-grant basis. This
approach saves agencies and recipient
organizations considerable time and
effort in cases when the organization
receives more than one grant or
contnct The revision has been modified
to reflect this approach. Further, section
c(l) follows existing accounting practice
and emphasizes that lobbying costs
must be identified and dealt with
appropriately, in accordance with the
Circular's indirect cost rate provisions.
Although very few commenters
criticized section c(l), some—including
Congressional sources—expressed
concern that the November proposal's .
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Federal xegiatBf / Vol. 49. Mo. 83 / Friday. April 17. 1984 / Notices
18273
•4.
language could be broadly interpreted
by agency auditors. Further, they
suggested that lobbying costs, because
of their political nature, should be
subject to only very limited/if any.
disclosure. '' '._
The purpose of section c(l) was
simply to require accounting information
necessary for the government to
calculate the reimbursement'of indirect
(overhead) costs. Such information is
already made available to auditors
through existing recordkeeping
requirements in Circulars A-122 and A-
110.
However, to clarify OMB's intent to
request only the minimum amount of
accounting data to comply with existing
accounting guidelines. OMB has
rewritten section cf 1) following
consultation with GAO and.
Congressional staffs. In essence, only
the minimal information that is needed
for the calculation 01 Federally*.
reimbursed overhead costs is now
required, and organizations are
completely exempt from this section if
they do not seek such Federal
reimbursement.
The new section c(l) says that only
the total lobbying costs must be
identified in the indirect coat rate
proposal This will allay concerns of
nonprofit groups'that separate
accountings and disclosures wen
mandated for each of the five
component definitions of lobbying set
forth in sections a(l)-«(S). Moreover.
since this information is aad* necessary
only for indirect cost calculations in
order to avoid Federal subsidization of
the lobbying process, this sentence also
explicitly makes clear that no such
disclosure is required by the revision
unless the grantee seeks reimbursement
for indirect costs. (See also. Internal
Revenue Service Form 990. requiring
lobbying cost disclosure, which many
nonprofit organizations now submit)
In comparison with the November
proposal, the new section c(l) sharply
reduces the accounting data requested.
eliminates language that some thought
gave agencies too much discretion in
requesting information, and explicitly
des the treatment of lobbying costs to
existing Circular A-122 requirements.
The November proposal's requirement
of "a statement identifying by category.
costs attributable in whole or in part" to
lobbying, as well as the requirement of a
statement of "how (lobbying costs) are '
accounted for," have been deleted.
Wh*n the existing Circular A-122
accounting requirements an reviewed in
conjunction with the uniquely lenient
recordkeeping treatment provided for
lobbying in section c(4) of the revision, it
becomes dear Oat such information is
the minimum necessary to achieve an
acceptable level of accounting integrity,
and that the overall recordkeeping
required for lobbying costs is much less
than that required for any other type of
allowable or unallowable cost
It should of course be noted that the
stated requirement that organizations
must "separately identify" their total
lobbying costs cannot be construed to _
limit auditors or indirect cost analysts
from requiring more detailed
breakdowns when such information
would normally be required under
existing indirect cost rate proposal
guidelines. Sea. ».%„ the Department of
Health and Human Services' "Guide for
Nonprofit Organizations" (May 1983) at
73 (Sample Indirect Cost Proposal
Format—Direct Allocation Method).
Additionally, if auditors suspect that an
organization may have misstated its
unallowable lobbying costs, they are aot
constrained from requesting any data
normally accessible under Circulars A-
122 and A-110. as long as such data
doaa not fall under the recordkeeping
exemption provided in section c(4).
Section c(l) follows existing Circular
A-122 requirements that provide for the
general disclosure of the coats spent on
unallowable activities. TAJ* requirement
is necessary so that when the
government calculates the amount of an
organization's indirect costs {/.A.
overhead) that it will pay. it does oat
include the coats of unallowable
activities) that thai organization happens
to account for aa indirect costs.
Paragraph BJ of the existing
Attachment A to Circular A-122 now
requires this:
The costs of certain activities ire net
allowable as charges to Federal awards (see,
for example, fond raising costs ia paragraph
19 of Attachment 8). However, ma though
these casts are unallowable for purposes of
computing charges ta Ftdaral awards, they
nonetheless auat be treated as direct costs •
for purposes of delerauaiag indirect cast
rates and be allocated their share of the
orianizadoB'i indirect casts if they represent
activities which: (1) Include fee salaries of
personnel (21 occupy apace, and (3] benefit
from the aiaanizsaoa's indirect casts. •
Some persons argued that
unallowable costs need not be reported.
since they are not Federally reimbursed.
However, it is impossible for the
government to properly determine the
extent to which it should pay for an
organization's indirect coats unless it
can determine what portion of the
organization's total indirect coats an
from allowable activities/and what
portion an unallowable. Such natment
is currently required under Circular A-
122*s Attachment A. Section D:
"Allocation of Indirect Costs and
Determination of Indirect Cost Rates."
Further, some persons argued that the
disclosure requirement should expressly
authorize that initial submissions in
indirect cost rate proposals set forth an
aggregated figure representing both
lobbying and other unallowable costs.
Such an approach would codify the
current practices of most (but. it should
be pointed out not all) grantees, a not
unsurprising fact in light of the
vagueness of the current standard and
the relative lack of audit resources
applied to determining whether lobbying
activities are supported by Federal
grants and contracts. Then is agreement
that auditors would be able to obtain
and would indeed require disaggregated
information on lobbying costs if they
engage in specific auditing of lobbying
disallowances.
In weighing this proposal against
agency auditors' concerns that detailed
breakdowns of lobbying costs are
critical to proper cost analyses, OMB
has resolved to require that only the
total amount of lobbying costs be
initially disclosed in the indirect cost
rat* proposal. OMB has determined that
it would make no sense to rely on
varying and what would almost
certainly ba inconsistent initiatives of
individual auditors, regional offices and
agencies to inquire, as a matter of
standard practice, into whether lobbying"
activities an being improperly
subsidized through indirect cost
allocations—or to rely on random audits
to accomplish this purpose. Thus, the
final revision requires, consistent with.
paragraph BJ of Attachment A and at a -
level of specificity less than that
generally provided for fundraising
activities, i.a.. disclosure only of a total
lump sum lobbying cast figure. .
Disclosure of such a figure will give
auditors a basis for further inquiry into
lobbying cost estimates set forth in
particular indirect cost rate proposals.
and will provide a level of detail that
actually would be minimally required in
every instance in which an auditor
seeks to determine whether Federal
subsidization of lobbying is taking place
through the overhead mechanism. Given
the 29% rule which makes more difficult
' auditor disallowances of lobbying
estimates, this balanced compromise—
and reduction in the level of detail
called for in the November 1983
proposal—is in OMFs judgment a
minimal requirement consistent with the
Circular's accounting guidelines.
.- 25 -
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18274 Federal Register / Vol. 49. No. 83 / Friday. April 27. 1964 / Notices
L Certification Requtnattnt—Section
42)
The requirement la section_a(2) of the
November 1983 prapotaL that
certification accompany the Financial
Status Report has b««n changed in tba
final version to a requirement that
certification accompany aa
organization's annual Indirect cost rate
proposal Sinca a Financial Status
Report is required for each grant that an
organization baa, while an organization
must file only ona indirect coat rate
proposal per year to cover ail of ita
grants, this change reduces paperwork
mrut Administrative effort.
Further, lobbying expenses art
usually included in indirect costs, which
an calculated on an organization-wide
basis. Consequently, the appropriate
place to certify such coats is in the
annual indirect cost rate proposal as
required under the Defense and GSA
proposed revisions. In addition, seat
future audits will be "single audits" of
all Federal funds received by the
grantee, so there will be less emphasis
on the Financial Statue Report and more
«t the indirect cost rate proposal.
M Reeor&eeaiag—SeetiottM e(3) and
44)
Documentation of the amounta of
allowable ""^ unallowable costs
became a necessity when the method of
cost treatment was changed from total
disallowance of cost items partially
involved in lobbying (the January 1983 ,
proposal) to the typical "allocation'* coat
treatment Tie principal alternative
considered by OMB wea to adopt the
documentation philosophy of the
restrictions on lobbying in the prior
Defense. GSA, and NASA procurement
regulations. /.*- to place the burden on
the grantee or the contractor to prove in
all instances the appropriateness of a
cost This approach, while consistent
with the cost principles in general
would entail an implied burden on some
indirect cost employees to «•»*»•«»«
records (time logs, calendars, or the like)
to establish the proportion of their time
spent on lobbying. Tins would be of
particular concern for high level official*
of grantees and contractors who. in the
ordinary course of business, may engage
in only a small ip"™11* of lobbying
OMB (along with Defense. CSA. and
NASA) will therefore allow grantees
and contractors to certify in good faith
the amount of their employee's time
attributable to lobbying activities.
No detailed recordkeeping
requirements have been included in this
revision, as these requirements are
generally set forth for all nonprofit
organizations in OMB Circular A-llft
. "Grants and Agreements with
Institutions of Higher Education.
Hospitals, and Other Nonprofit
Organizations: Uniform Administrative
Requirements" (See. e.g.. Circular A-
110. Attachments C and F.) That Circular
generally requires grantees, inter alia, to
keep for a period of three years,
"[fjlnandal records, supporting
documents, statistical records, and all
other records pertinent to (grants)," and
tinent
rds
to access for audit purposes "
books, documents, pa
of * • recipient organizations."
Section c(3) restates the general rule
for cost documentation, but is modified
by section c(4J, which provides that for
the purposes of complying with this
revision, employees are not required to
prepare or «*•">*•«• time logs.
calendars, or similar records to
treated as an indirect cost This means
that the agency and auditor must rely on
the employee's good-faith estimates of
time spent in lobbying, or upon other
evident* not otherwise precluded As
noted earlier, the absence of time logs or
comparable records for indirect coat
time net kept pursuant to the discretion
of the grantee or contractor will not
serve aa a basis for government auditors
disallowing claims of allowable coats by
contesting unallowable lobbying time)
estimates except In two ******
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Federal Register / VoL 49. No. 33 / Friday. April 37. 1984 / Notices
18275
"lobbying" is appropriately designated
•• paragraph 821. necessitating the
renumbering of former paragraph* 321
through BSO as B22 through BS1.
VID. Paperwork Raiducdoa Act
Considerations
The November notice invited
"comments about the appropriateness of
collection of information requirements
in.this proposal" to be submitted to
OMB's Office of Information and
Regulatory Affairs. Forty-three such
comments were received. Of these.
twenty expressed general concerns
. similar to chose of other commenters but
raised no specific paperwork burden
issues.
The twenty-tore* other commenters
followed, almost verbatim, points raised
by the Canter for Non-Profit
"Corporations. These alleged that a
"substantial increase" in paperwork
would result from the recordkeeping
mandated by Circular A-122. The
commenters asserted that the additional
paperwork burden would occur to: (1)
Meet requirements for the annual
indirect cost proposal and (2) maintain
the records required to demonstrate that
coats an allowable or unallowable.
However, by establishing uniform and
well-defined guidelines for lobbying
coats, and by explicitly restricting the
paperwork that auditors can require for
documentation of such costs, this
revision may significantly reduce the net
paperwork burden to which grantees an
now legally subject Clearly, some
grantees may avoid the existing
paperwork requirements by ignoring the
multiple—and oftern vague—sets of
lobbying reimbursement restrictions that
have been issued by the various
agencies, and likewise ignore the
existing accounting rules in Circular A-
122 regarding treatment of such coats.
Such non-compliance may currently
exist in part because government
auditors have found it difficult to
efficiently enforce the myriad of vague
restrictions on lobbying costs. With the
clear guidelines provided by this
revision, agency and audit enforcement
will increase. Those grantees alnady in
compliance with the differing seta of
restrictions will enjoy a much-reduced
paperwork burden: those who have
previously ignored these restrictions will
find that non-compliance is more likely
to be questioned by government
auditors.
Moreover, regardless of whether
grantees currently choose to adhere to
existing rules on lobbying, most
routinely maintain detailed books.
regarding their expenditures. Annual
financial planning by the nonprofit itself
and filing requirements of the Internal
Revenue Service alnady require
maintenance of detailed records.
In general. Circular A-122 will not *
require employees to keep a second set
of books. s.g.. time logs, to record
lobbying. In fact, most employees who
engage in lobbying are explicitly
exempted from any requirements to
keep time'logs or other similar
documents. This is because most
lobbying is done by indirect cost (e.g..
headquarters staff) employees, and
section c(4) states that employees who
certify that they spend less than 29% of
their compensated time lobbying do not.
have to keep such records documenting
that portion of their time that is treated
as an indirect cost Since employees
whose time is charged directly to
contracts already must keep such
records, no special rale for direct cost
time ia necessary.
The 23 critics of the revision also
submitted identical comments to the
effect that "(tjax dollars will be diverted '
to. unnecessary paperwork and .
needlessly drawn away from the
purpose of the organizations by these
requirements." As discussed above, the
fact that the revision decreases, in
general, existing paperwork
requinmenta will reduce the current
recordkeeping coats incurred to comply
with existing restrictions.
Some commenters argued that
differing Internal Revenue Code and
Circular A-122 standards would require
maintenance of two seta of financial
books. Mo commenters were able to
specify any situation in which a detailed
set of expenditure records for lobbying
would not provide sufficient information
to serve the filing or audit requirements
of the Internal Revenue Service aa well
as those of the various grant or
contracting agencies implementing the
revision.
OMB will review all agency
information burden requests to
implement Circular A-122 according to
the standards of the Paperwork
Reduction Act None of the comments
OMB received from agencies mentioned
any specific concern over a possible
increase in paperwork.
DC. Enforcement
Circular A-122 is a management'
- directive to Federal agencies
establishing cost principles for use in
connection with grants and contracts
with nonprofit organizations. It does not
contain its own enforcement
mechanism, though its terms an
incorporated in grants and contracts
through agency regulations or groat
instruments. The degree and natun of
enforcement of these anti-lobbying
provisions will depend, therefore, on
operational experience and competing
demands on enforcement resources.
1. Voluntary compliance. The bedrock
for enforcing these provisions is
voluntary compliance by grantees and
contractors. In the past restrictions on
the use of Federal funds for lobbying
have been inadequately communicated
and defined. Neither agencies nor
recipient organizations devoted much
attention to them. This revision is
expected to improve -ompiiance .
significantly by:
. • Defining unallowable activities so
that organisations can comply in good
faith: and
• Providing occasions (indirect cost
rate negotiations) in which responsible
officials of the grantee or contractor will
focus specifically on the issue of the
organization's compliance.
To assut organizations in complying.
agencies an to be prepared to resolve
definitional questions concerning
potential expenditures in advance. This
procedure should reduce the inevitable
difficulty of interpretations at the -
margin.
. 2- Sanctions. OMB considered and
rejected as too stringent a penalty •
provision which would require the .
return to the Federal government of all
grant or contract funds received by a
nonprofit organization found to be using
Federal fund* to engage in lobbying.
Instead, penalties for violating this
revision an the some aa for violations of
existing Circular A-122 provisions. The
principal sanction in the event of minor
or unintentional violations is cost
recovery, i.a.. the Fedenl agency will
obtain reimbursement from the
contractor or grantee of misspent funds.
In man serious cases, contracts and
grants can be suspended or terminated.
or contractors and grantees can be .
debarred from further awards. The
availability of these sanctions for
violating the anti-lobbying nsfrictiona
of appropriations legislation has been
confirmed by the Office of Legal
Counsel of the Department of Justice.
3. Audit*. Contractors and grantees
an currently subject to audit
requirements, and to the possibility of
audit by agency Inspectors General or
the Comptroller General: however, only
ranly have audits focused on .
compliance with anti-lobbying
provisions due to the difficulty of
determining proper adherence to a
myriad of frequently vague restrictions.
After uniform coat principle* an
promulgated, it will become possible for
uniform and effective audit enforcement
to take place. Stratified audits and other
strategies can be used to create an
27
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18276
Federal Register / Vol 49. No. '83 / Friday. April 27. 1964 /'• Notices
incentive for greater compliance among
all grantees and contractors.
Alternatively, promulgating • defined
set of rales can and wilt serve-as a .
protection against audit harassment
and will and ihould make for fairer and
simpler audits for granteea and
contractor). This should be of particular
benefit to smaller grantees and
contractor* who lack the means and
support staff to contend with audits
under the vague, ambiguous, and diverse
rales now in effect. With expanded
Inspector General and agency audit
staffs now in place, the protection*
afforded by the proposal are manifest
X. Designation as "Non-Major" Rut*
OMB Circulars are not "rules" within
the meaning oflhe Administrative
Procedures Act or Executive Order No.
12291. Instead, they are management
directives by which OMB. on behalf of
&e President, instructs Executive
Branch entities how to exercise their
authority in matters subject to agency
discretion. Even if the Circular were
considered e "rule," however. OMB has
determined that the revision to Circular
A-122 would not qualify as a "major
rule" under the criteria as listed in
Executive Order No. 12291. which
defines a "major rule" as "any
regulation that is likely to result in:
(1) An annual effect on the economy
of S100 million or more:
(2) A major increase in costs or prices
for consumers, individual industries.
Federal state, or local government .
agencies, or geographic regions: or
(3) Significant advene effects on
competition, employment, investment.
productivity, innovation, or on the
ability of United Suies-bssed
enterprises to compete with foreign-
based enterprises in domestic or export
markets.
The principal effect of the revision
wiU be to ensure that Federal grant
funds are used for the purposes for
which (hey were intended, and not to
facilitate lobbying activities. As noted
above, current financial control
procedures do not permit an accurate
estimate of the amount of tax dollars
now diverted to lobbying efforts by
grantees and contractors. Whether large
or small correction of this problem will
produce a net gain to the intended
beneficiaries of Federal programs. The
costs to be considered are primarily
accounting and recordkeeping costs for
grantees and contractors, as well as
Federal agencies. These additional
costs, however, are minimal in both
absolute and relative terms. Indeed, in
many instances, the revisions should
reduce audit and compliance costs.
Furthermore, much of the accounting
work that the revision requires is
already mandated by other sections of
Circular A-122. Circular A-110, or other
provisions of law.
Issued In WsiMAtton. O.C. April 21 :9*4.
Caoaes C Bryant
Deputy Aiuxiatf Dinctotfet
Admuiittration.
1. Insert a new paragraph in
Attachment B. as follows: "B21
Lobbying"
a. Notwithstanding other provisions of
this Circular, costs associated with the
following activities are unallowable:
a.(l) 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;
a.(2) 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;
a.(3) Any attempt to influence: (1) The
introduction of Federal or state
legislation: or (U) the enactment or
modification of any pending Federal or
state legislation through communication
with my member or employee of the
Congress or state legislature (including
efforts to influence State or local
officials to engage is similar lobbying
activity), or with any government
official or employee in connection with
a decision to sign or veto enrolled
legislation:
a.(4) Any attempt to influence: (i) The
introduction of Federal or state
legislation: or (il) 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.
fuadraising drive. lobbying campaign or
letter writing or telephone campaign; or
a.(3] 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.
b. The following activities an
axcepted from the coverage of
subparagraph a:
b.(l) Providing a technical and factual
presentation of information on a topic
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 e Congressional Record
notice requesting testimony or
statements for the record at a regularly
scheduled hearing) made by the
recipient memoer. legislative body or
subdivision, or a cognizant staff member
thereof: provided such information is
readily obtainable and can be readily
put in deliverable form: ind further
provided that costs under thjs section
;or 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 hearing.
b.{2) Any lobbying mace unallowable
by section a.(3) to influence State
legislation in order to directly reduce the
coat or to avoid material impairment of
the organization's authority to perform
the gnat contract or other agreement.
b.(3) Any activity specifically
authorized by statute to be undertaken
with funds from the grant contract or
other agreement
c.(l) When an organization seeks
reimbursement for indirect costs, total
, lobbying costs shall be separately
identified in the indirect cost rate
proposal and thereafter treated as other
unallowable activity costs in
accordance with the procedures of
paragraph B3 of Attachment A.
c(2) Organizations shall submit as
part of their annual indirect cost rate
proposal a certification that the
requirements and standards of this
paragraph have been complied with.
c.(3) Organizations shall maintain
adequate records to demonstrate that
the determination of costs as being
allowable or unallowable pursuant to
paragraph B21 complies with the
requirements of this Circular.
c^4) Time logs, calendars, or similar
records documenting the portion of an
employee's time mat is treated as an
indirect cost shall not be required for the
purposes of complying with
subparagraph c, and the absence of such
records which are not kept pursuant to
the discretion of the grantee or
contractor, will not serve as a basis for
disallowing claims of allowable costs by
contesting estimates of unallowable
lobbying time spent by empioyeee
during any calendar month unless: (i]
The employee engages in lobbying, as
defined in subpangrapht • and b, more
than 23* of his compensated hours of
28
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_^^ Federal .gister / Vol. 49. No. 83 / Friday. April . 1984 / Notices 18277
employment during thai calendar month; the Interpretation or application of contudiif tht lawfulness of such a
or (ii) the organization hai materially paragraph B2L Aay such advaae* determination.
mutated allowable or unallowable resolution iball bt binding* in any 2. Ranumbtr subaaquant paragraph!
costs within tha pracading Bva yaar nib'atquant lattlamanta, audits or of Attaehmant &
period. - iavastigatfona with mpact to that grant mummuMnfrraitamat
c.(5)AgancJatshaU«tabliih or contract for purpoaaa of INOTt Tlii. rtpriat ineorporat., comettoiu
proeadures for molvuig in advanca, in intarpntadoa of thia Circular providad that u* pubUihtd in tha r«rf»«l Xagiitw of
consultation with OM& any significant howavar. that thia shall not ba eonatniad Tumday. May
queiaona or diaagreaoanta concerning to prevent a contractor or grantee from MUM coca
29
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13278
Federal Register / Vol. 49. No. 33 / Friday. April 27. 1984 / Rules and Regulations
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
41 Cm Part 31
(•Men! Acquisition Ctreuiv M-J]
Federal Acquisition Regulation
(NOTE: This rtpnni incorporates corrections
thai an published in the Federal Raeistar of
Tuesday. May a. 19*4.)
'X Department of Defense
in this Federal Acquisition Circular is
effective July 1. 1964.
PaOida Q. SchoNi.
(DoO). General Services Administration
(GSA). National Aeronautics and Space
Administration (NASA).
ACneic Final rule.
SUMHANV: This Federal Acquisition
Circular (FAQ amends the Federal
Acquisition Regulation (FAR) with
respect to the lobbying cost principle in
the FAR subpaxt that covers contract
cost principles in contracts with •
commercial organizations.
•pvicnvt DATE July 11984.
mum
rTACT:
Roger M. Schwartz. Director. FAR
Secretariat Room 4041. GS Building,
Washington. D.C 20405. Telephone (202)
S2M7SS.
SUPtUMIMTAJIY IN*O«tATiO*K The
Office of Management and Budget
(OMB) has directed chat the agencies
implement the intent and substance of
the OMB Circular A-122 lobbying cost
principle in FAR Subpart 31-2. Contracts
with Commercial Organizations.
Accordingly, the lobbying cost principle
in OMB Circular A-122 has been edited
and conformed to FAR format The
revised cost principle in FAC 84-2
defines unallowable lobbying cost
activity in a manner consistent with the
OMB circular. '
List of Subjects in 41CFR Part 3t
Government procurement
Rotw M. Scfawwo.
Dirtctar. FAX Seerettrwt • .
AofUM.1984.
Federal Acquisition Circular
(Nume«r 84-2]
Unless otherwise specified, all
Federal Acquisition Regulation (FAR]
and other directive material contained
Auitteat Administrator for Procartmtnt
Mary Aaa Gilleece.
Qtptttjr Undtf Sxntary afDtfmtt
f Acquisition Manogtonnt).
Federal Acquisition Circular (FAC)
94-2 amends the Federal Acquisition
Regulation (FAR) as specified below.
The following is a summary of (he
amendment:
Item I— Lobbying Coeta
The Office of Management and Budget
(OMB) has directed that the agencies
implement the mt§nt and substance of
the OMB Circular A-122 lobbying cost
principle in FAR Subpart 31.2. Contracts
with Commercial Organizations.
Accordingly, the lobbying cost principle
in OMB Circular A-122 has been edited
and conformed to FAR format The cost
principle in FAR 31.205-22 is revised to
define unallowable lobbying cost
activity in a manner consistent with the
OMB circular.
Therefore. 48 CFR is amended as set
forth below.
AntfaotUr 40 U.S.C. 4M(e|: Chapter 137. 10
U.S.C.. tad 42 U.S.C 2453(0.
PART 31— CONTRACT COST
PRINCIPLES AND PROCEDURES
1. Subsection 31.205-22 ia revised to
read as follows:
(a) Costs associated with the
following activities are unallowable:
(1) 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 activities:
(2) 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:
(3) Any attempt to influence (i) the
introduction of Federal or state
legislation, or (ii) the enactment or
modification of any pending Federal or
state legislation through rflHiiini'*'^***^''
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), or with any government
official or employee in connection with
a decision to sign or veto enrolled
legislation:
(4) Any attempt to influence (i) the
introduction of Federal or state
legislation, or (ii) 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 ariy 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
(5) 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 activities.
(b) The following activities an
exeepted from the coverage of fa) above:
(1) Providing a technical and factual
presentation of information on a topic
directly related to the performance of a
contract 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
recipient member, legislative body or
subdivision, or e cognizant staff member
thereof: provided such information is
readily obtainable and can be readily
put in deliverable form: and further
provided chat costs under this section
for transportation, lodging or meals an
unallowable unless incurred for the
purpose of offering 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 hewing.
(2) Any lobbying made unallowable
* by (a]{3) above to influence state
legislation in order to directly reduce
contract cost or to avoid material
impairment of the contractor'! authority
to perform the contract.
(3) Any activity specifically
authorized by statute to be undertaken
with funds from the contract.
(c) When a contractor seeks
reimbursement for indirect costs, total
lobbying costs shall be separately
identified in the indirect cost rate
proposal and thereafter treated as other
unallowable activity coats.
(d) Contractors shall submit as part of
their annual indirect coat rite proposals
a certification that the requirements and
30
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Federal Register / Vol. 49. No. 83 / Friday, April 27. 1984 / Rulaa and Regulations
18279
standard* of this subnotion have been
eompifad with.
(t) Contractors shall maintain
adequate rteorda to demonstrate that
the certification of cojits u being
ailoweble or unalloweble pursuant to
thia subsection complies with the
requirements of this subsection.
(f) Time logs, calendars, or similar
records documenting the portion of an
employee's time that is treated as an
indirect cast shall not be required for the
purposes of complying with this
subsection, and the absence of such
records which are not kept pursuant to
the discretion of the contractor will not
serve as a basis for disallowing
allowable costs by contesting estimates
of unallowable lobbying time spent by
employees during any calendar month
unless: (1) the employee engages in .
lobbying, aa defined in (a) and (b)
above, more than 23* of the employee's
compensated hours of employment
during that calendar month: or (2) the
organization has materially misstated
allowable or unallowable costs within
the preceding five year period.
(l) Existing procedures should be
utiliied to resolve in advance any
significant questions or disagreements
concerning the interpretation or
application of this subsection.
(Fl OH. M>»MI ntt «-»-»• V** «•!
[NOTE: This reprint Incorporates eomctioiu
that ue published in the Ftdmi R*ctoMr of
Tuesday. May a. ISM.)
- 31 -
-------
-------
APPENDIX. 4
Tuesday
July 8, 1980
Not* Thla reprint Incorporates
corrections published at 48 PR 17185,
Tussday, March 17,1S81.
Part II!
Office of
Management and
Budget
Circular A-122, "Coat Principles for
Nonprofit Organisations"
-------
46022
Federal Register / Vol. 45. No. 132 / Tuesday. July 8. 1980 / Notices
Of riCt. Of MANAGEMENT AND .
BUDGET
Circular A-122, "Cost Mndpto* for
Nonprofit Organizations" ~
(Not*: This reprint incorporate* corrections
published *t «« FR 17185. Tuesday, March 17.
1981.)
AQINCY: Office of Management and
Budget.
ACTION; Final Policy.
SUMMARY: This notice advises of a new
OMB Circular dealing with principles for
determining costs of grants, contracts.
and other agreements with nonprofit
organizations.
The Circular is the product of an
interagency review conducted over a ,
two-year period. Its purpose is to
provide a set .of cost principles to
replace existing principles issued by
individual agencies. These have often
contained varying and conflicting
requirements, and created confusion
among agency administrators, auditors.
and nonprofit officials. The new Circular
will provide a uniform approach to the
problem of determining costs, and
promote efficiency and better
understanding between recipients and
the Federal Government.
tmcnvi DATE The Circular becomes
effective on issuance.
ran SVHTMWI INFORMATION CONTACT:
Palmer A. Marcantonio. Financial
Management Branch. Office of
Management and Budget. Washington.
D.C. 20503, (202) 395-4773.
tUPVUMlNTANY INFORMATION: Before
the Circular became final there was
extensive coordination with the affected
nonprofit organizations, professional
associations. Federal agencies and
others. All interested persons were
given an opportunity to comment on the
proposed Circular through informal
consultations and a notice in the Federal
Register, in response to our requests for
comment, we received about 100 letters
from Federal agencies, nonprofit
organizations, associations, and other
interested members of the public. These
comments were considered in the final
version of the Circular. There follows a
summary of the major comments and the
action taken on each.
In addition to the changes described.
other changes have been made to
improve the clarity and readability of
the Circular. To the extent possible, we
have tried to make the language of this
Circular consistent with that of cost
principles for educational institutions
(Circular A-21), and Slate and local
governments (Circular 74-4).
Summary of Significant Changes:
Set forth are changes that have been
made in the final Circular as a result of
public comments. The more significant
changes to the basic Circular and
Attachment A include:
t. Paragraph 2. "Supersession" was
added to the basic Circular to make it
clear that this Circular supersedes'cost
principles issued by individual agencies.
2. Paragraph 4 of the basic Circular
has been amended to make it dear that
the absence of an advance agreement on
any element of cost will not in itself
affect the reasonableness of allocabitity
of that element. Also, this paragraph
was amended to make it dear that
where an item of cost requiring prior
approval if specified in the budget,
approval of the budget constitutes
approval of the cost.
3. Paragraph 5 of the basic Circular
has been changed to remove any doubt
as to which nonprofit organizations
would not be covered by the Circular.
Now. Appendix C to the Circular lists all
exclusions.
4. Paragraph a was added to the basic
Circular to permit Federal agendas to
request exceptions from the
requirements of the Circular.
S. Paragraph &2. was added to
Attachment A to cover the negotiation
and approval of indirect cost rates, and
to provide for cognizance arrangements.
The more significant changes to
Attachment B to the Circular tndude:
1. Paragraph 8, Compensation for
Personal Services, was modified to:
a. Permit Federal agencies to accept a
substitute system for documenting
personnel costs through means other
than personnel activity reports.
b. Clarify previsions covering the
allowability of costs for unemployment
compensation or workers'
compensation, and costs of insurance
policies on the lives of trustees, officers,
or other employees.
c. Make unallowable any increased
costs of pension plans caused by
delayed funding.
d. Delete a paragraph dealing with
review and approval of compensation of
individual employees.
2. Paragraph 7. Contingencies, was
changed to make it clear that the term
"contingency reserves'* exdudes self-
insurance reserves or pension funds.
3. Paragraph 10 was modified to
provide that the value of donated
services used in the performance of a
direct cost activity shall be allocated a
share of indirect cost only when (a) the
aggregate value of the service is
material, (b) the services are supported
by .a significant amount of the indirect
cost incurred by the organization, and
(c) the direct cost activity is not pursued
primarily for the benefit of the Federal
Government. Provisions were also
added to this paragraph for the
cognizant agency and the recipient to
negotiate when there is no basis for
determining the fair market value of the
services rendered, and to permit indirect
costs allocated to donated services to be
charged to an agreement or used to meet
cost sharing or matching requirements.
4. Paragraph 13. Equipment and Other
Capital Expenditures, was changed.
Capital equipment is now defined as
having an acquisition cost of $500 and a
useful life of more than two years.
5. Paragraph 24. Meetings,
Conferences. The prior approval
requirement for charging meetings and
conferences as a direct cost was
deleted. A sentence was added to make
it dear such costs were allowable
provided they meet the criterion for the
allowability of cost shown in
Attachment A.
0. Paragraph 28, Organization Casts.
was amended to provide that
organization costs may be allowable
when approved in writing by the
awarding agency.
7. Paragraph 28. Page Charges in
Professional fournais, was revised to
provide that page charges may be
allowable.
8. Paragraph 36. Public Information
Service Costs, was modified to make
public information costs allowable as
direct costs with awarding agency
approval.
9. Paragraph 42, Rental Costs, was
rewritten to:
a. Make it dear that renta! costs
under leases which create a material
equity on the leased property are
allowable only up to the amount that '.he
organization would have been allowed
had it purchased the property: e.g..
depreciation or use allowances.
maintenance, taxes, insurance, etc.
b. Clarify the criteria for material
equity leases.
10. Paragraph' 50, Travel Costs, was
amended to delete the prior approval
requirement for domestic travel. In
addition to the above., a number of
editorial changes were made to the
original document.
Suggested Changes Not Considered
Necessary.
Comment. Several respondents
questioned the provision that, for "less
than arm's length" leases, rental costs
an allowable only up to the amount that
would be allowed had title to the
property been vested in the grantee
organization. In their opinion this rule
will result in unnecessary cost to the
Federal Government, since it would
encourage an organization to lease
space on the commercial market a! a
higher rate.
-------
Fuderal Kngister / Vol. 45. No. 132 / Tuesday. July 8. 1980 / Notices
46023
e. Thu cost principles are
-designed to cover most situations:
however, there are always exceptions
that must be considered on a-case-by-
case basis. The Circular contains a
.provision for FederaTagencies to request
exceptions.
Comment. Several respondents ;
questioned why interest is not an
allowable cost, since it is an ordinary
and necessary cost of doing business.
Response. It has been a longstanding
policy not to recognize interest as a cost.
However, this policy has recently been
revised for State and local governments
in Circular 74-4. with respect to the cost
of office space. The revision provides
that "rental" rates for publicly owned
buildings may be based on actual costs.
including depreciation, interest,
operation and maintenace costs, and
other allowable costs. This revision was :
under consideration for some time. It
was studied extensively by OMB. the
General Accounting Office and others,
and considerable analysis went into its
formulation. Suggestions for extending it
to nonprofit organizations would have to
be examined with equal care. This has
not yet been done: and we were
reluctant to further delay issuance of
this Circular. < ,
Comment. Several respondents
questioned why public information costs
were not allowable as an indirect cost.
Response. Public information costs
are often direct services to an
organization's other programs. They are
allowable, however, as a direct charge
when they are within the scope of work
of a particular agreement.
Comment. One respondent suggested
that smaller grantees be excluded from
complying with the Circular.
Response. Similar rules for the 50
selected items of cost would be needed
regardless of the size of the grantee. To
the extent possible, the Circular
provides simplified methods for smaller
grantees.
Comment. One respondent said the
requirements of the Cost Accounting
Standards Board should be applied to
cover contracts with nonprofit
organizations.
Response. It is unlikely that the type
of grantees covered by this Circular
would have contracts large enough to be
covered by the CASH. In the event that
they do. however, the regulations of the
CASB would apply.
Comment. One respondent said the
allocation of indirect cost to donated
services would'pose a tremendous
difficulty to the organization. The
organization relies on a corps of.
approximately 8.000 committee members
to carry out obligations in response to
Government requests. There is no
employer relationship in the
arrangements for this assistance, nor are
there committee members normally
reimbursed for such services. Further, it
was pointed out the committee members
-spend many thousands of,hours outside
the organization's premises conducting
research.
Response. It would appear that this
type of committee arrangement would
not be considered in the determination
of the organization's indirect cost rate
provided that Federal agreements do not
bear an unreasonable share of indirect
cost. However, the cognizant agency
will be responsible for evaluating the
allocation of indirect cost where there
are committee-type arrangements on a
case-by-case basis.
Comment One respondent suggested
that wherever possible the language in
the Federal Procurement, Regulations be
used for nonprofit organizations.
Response. The language in the Federal
Procurement Regulations was
designated primarily for commercial .
firms, and is not necessarily well suited
to nonprofit organizations. At the
suggestion of the General Accounting
Office, the nonprofit cost principles
were written to conform as closely as
poaaible to those of educational
institutions (Circular A-21). and State
and local governments (Circular 74-4).
lofao ], Lotdao,
Chief. Financial Management Branch.
(Circular No. A-122]
fum 27.1980
To The Heads of Executive
Departments and Establishments
Subject: Cost principles for nonprofit
organizations. •
1. Purpose. This Circular establishes
principles for determining costs of
grants, contracts and other agreements
with nonprofit organizations. It does not
apply to colleges and universities which
are covered by Circular A-21: State.
local, and federally recognized Indian
tribal governments which are covered
by Circular 74-4: or hospitals. The
principles are designed to provide that
the Federal Government bear its fair
share of costs except where restricted or
prohibited by law. The principles do not
attempt to prescribe the extent of cost
sharing or matching on grants, contracts,
or other agreements. However, such cost
sharing or matching shall not be
accomplished through arbitrary
limitations on individual cost elements
by Federal agencies. Provision for profit
or other increment above cost is outside
the scope of this Circular.
2. Supersession. This Circular
supersedes cost principles issued by
individual agencies for nonprofit
organization.
3. Applicability, a. These principles
shall be used by all Federal agencies in
determining the costs of work performed
by nonprofit organizations under grants,
cooperative agreements, cost
reimbursement contracts, and other
contracts in which costs are used in
pricing, administration, or settlement.
All of these instruments are hereafter
referred to as awards. The principles do
not apply to awards under which an
organization is not required to account
to the Government for actual costs
incurred.
b. All cost reimbursement subawards
(subgrants. subcontracts, etc.) are
subject to those Federal cost principles
applicable to the particular organization
concerned. Thus, if a subaward is to a
nonprofit organization, this Circular
shall apply; if a subaward is to a
commercial organization, the cost
principles applicable to commercial
concerns shall apply: if a subaward is to
a college or university. Circular A-21
shall apply; if a subaward is to a State.
local, or federally recognized Indian
tribal government Circular 74-4 shall
apply-
4. Definitions, a. "Nonprofit
organization"means any corporation.
trust, association,' cooperative, or other
organization which (l) 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 its net proceeds to maintain.
improve, and/or expand its operations.
For this purpose, the term "nonprofit
organization" excludes (i) colleges and
universities; (ii) hospitals: (iii) Stale.
local, and federally recognized Indian
tribal governments: and (iv) those
nonprofit organizations which are
excluded from coverage of this Circular
in accordance with paragraph 5 below. —
b. "Prior approvaJ" means securing
the awarding agency's permission in
advance to incur cost, for those items
that are designated as requiring prior
approval by the Circular. Generally this
permission will be in writing. Where an
item of cost requiring prior approval is
specified in the budget of an award.
approval of the budget constitutes •
approval of that cost.
5. Exclusion of some nonprofit
organizations. Some nonprofit
organizations, because of their size and
nature of operations, can be considered
to be similar to commercial concerns for
purpose of applicability of cost
principles. Such nonprofit organizations
shall operate under Federal cost
principles applicable to commercial
concerns. A listing of these
- 34 -
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46024
Federal Register / Vol. 45. No. 132 / Tuesday. July 6. I960 / Notices
organizations is contained in
Attachment C. Other organizations may
be added from time to time.
responsible for administering programs
that involve awards to nonprofit
organizations shall implement the
provisions of this Circular. Upon
request, implementing instruction shall
be furnished to the Office of
Management and Budget. Agencies shall
designate a liaison official to serve as
the agency representative on matters
relating to the implementation of this
Circular. The name and title of such
representative shall be furnished to the
Office of Management and Budget
within 30 days of the date of this
Circular.
7. Attachments. The principles and
related policy guides are set forth in the
following Attachments:
Attachment A— General Principles
Attachment 8— Selected Items of Cost
Attachment C— Nonprofit
Organizations Not Subject to This
Circular
8. Requests for exceptions- The Office
of Management and Budget may grant
exceptions to the requirements of this
Circular when permissible under
existing law. However, in the interest of
achieving maximum uniformity.
exceptions will be permitted only in
highly unusual circumstances.
9. Effective Date. The provisions of
this Circular are effective immediately.
Implementation shall be phased in by
Incorporating the provisions into new
awards made after the start of the
organization's next fiscal year. For
existing awards the new principles may
be applied if an organization and the
cognizant Federal agency agree. Earlier
implementation, or a delay in
implementation of individual provisions
is also permitted by mutual agreement
between an organization and the
cognizant Federal agency.
10. Inquiries. Further information
concerning this Circular may be
obtained by contacting the Financial
Management Branch. Budget Review
Division. Office of Management and
Budget, Washington. D.C 20503.
telephone (202) 395-4773.
lames T. Mctatyre, Jr..
Director.
[Circular No, A-J22J
AHachnent A
Table of Content*
A. Basic Considerations
1. Composition of total cost*
2. Factors affecting allowability of costs
3. Reasonable coats
4. Allocable costs
S. Applicable credits
6. Advance understandings
B. Direct Costs
C. Indirect Costs
D. Allocation of Indirect Costs and
Determination of Indirect Cost Rates
1. General
2. Simplified allocation method
3. Multiple allocation base method
4. Direct allocation method
S. Special indirect cost rates
E. Negotiation and Approval of Indirect Cost
Rates
1. Definitions
2. Negotiations and approval of rates
[Circular No. A-122]
Attachment A
General Principles
-4. Basic Considerations.
1. Composition of total costs. The total coit
of an award is the sum of the allowable
direct and allocable indirect costs less any
applicable credits.
2. Factors affscting allowabiiity of cost*.
To be allowable under an award, costs must
meet the following general criteria:
a. Be reasonable for the performance of the
award and be allocable thereto under these
principles.
b. Conform to any limitations or exclusions
set forth in these principles or in the 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
organization.
d. Be accorded consistent treatment
e. Be determined in accordance with
generally accepted accounting principles.
f. Not be included as a cost or used to meet
cost sharing or matching requirements of any
other federally financed program in either the
current or a prior period.
g. Be adequately documented.
3. Reasonable costs. A cost is reasonable
if. in its nature or amount, it does not exceed
that which would be incurred by • prudent
person under the circumstance! prevailing at
the time the decision was made to incur the
costs. The question of the reasonableness of
specific costs must be scrutinized with
particular can in connection with
organizations or separate divisions thereof
which receive the preponderance of their
support from awards made by Federal
agencies. In determining the reasonableness
of a given cost, consideration shall be given
to:
a. Whether the cost is of a type generally
recognized as ordinary and necessary for the
operation of the organization or the
performance of the sward.
b. The restraints or requirements imposed
by such factors as generally accepted sound
business practices, arms length bargaining.
Federal and State lawa and regulations, and
terms and conditions of the award.
c. Whether the individuals concerned acted
with prudence in the circumstances.
considering their responsibilities to the
organization, its members, employees, and
clients, the public at large, and the
Government.
d. Significant deviations from the
established practices of the organization
which may unjustifiably increase the award
costs.
4. Allocable costs.
•• a. A cost is sllocabie to a particular cos*
objective, such as a grant, protect, service, or
other activity, in accordance with the relative
benefits received. A cost is ailocable to a
Government award if it ia treated "
consistently with other costs incurred for :he
same purpose in like circumstances and if:!:
(1) Is incurred specifically for the award.
(2) Benefits both the award and other worn
and can be distributed in reasonable
proportion to the benefits received, or
(3) Is necessary to the overall operation of
the organization, although a direct
relationship to any particular cost objective
cannot be shown.
b. Any cost allocable to a particular award
or other cost objective unaer ma^e principles
may not be shifted to other rscaral awards ;o
overcome funding deficiencies, or to avoid
restrictions imposed by iaw or oy che :erms
of the award.
S. Applicable credits.
a. The term applicable credits refers to
those receipts, or reduction of expenditures
which operate to offset or reduce expense
items that are allocable to awards as direct
or indirect costs. Typical examples of such
transactions are: purchase discounts, rebates
or allowances, recoveries or indemnities on
. losses, insurance refunds, and adjustment* of
overpayments or erroneous charges. To she
extent that such credits accruing or received
by the organization relate to allowable cost
they shall be credited to the Government
either as a cost reduction or cash refund as
appropriate.
b. In some instances, the amounts receiveu
from the Federal Government to finance
organizational activities or service operations
should be treated as applicable credits.
Specifically, the concept of netting such
credit items against related expenditures
should be applied by the organization in
determining the rates or amounts to.be
charged to Federal awards for services
rendered whenever the facilities or other
resources used in providing such sen-ices
have been financed directly, in whole or in
part by-Federal funds. '
(c) For rules covering program inccme
(i.e.. gross income earned from federally
supported activities) see Attachment O of
OMB Circular A-110.
0. Advance understandings. Under any
given award the reasonableness and
alienability of certain items of costs may be
difficult to determine. This is particularly true
in connection with organizations that receive
a preponderance of their support from
Federal agencies, in order to avoid
subsequent disallowance or dispute based on
unreasonableness or nonallocabitity. it is
often desirable to seek a written agreement
with the cognizant or awarding agency in
advance of the incurrence of special or
unusual costs. The absence of an advance
agreement on any element of cost will not, in
itself, affect the reasonableness or
alienability of that element.
_ 35 _
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Federal Register / Vol. 45. No. 132 / Tuesday, fuly 8. 1980/Notices
46025
8. Direct Costs
1. Direct costs are those that can be
identified specifically with a particular final
cost objective: i.e.. a particular award.
project, service, or other direct activity of an
organization. However, a coit may not be
assigned to an award as a direct coit if any
other cost incurred for the same purpose, in
like circumstances, has-been allocated to an
iiwitrd us an indirect cost. Costs identified '
specifically with awards are direct costs of '
ihr awards and are to be assigned directly
thereto. Costs identified specifically with
other final cost objectives of the organization
Art direct costs of those cost objectives and
are nut to be assigned to other awards
directly or indirectly.
2. Any direct cost of a minor amount may
be treated as an indirect cost for reason* of
practicality where the accounting treatment
for such cost is consistently applied to alt'
final cost objectives.
3. The cost of certain activities are not
allowable as charges to Federal awards (see.
_.for example, fund raising costs in paragraph
19 of Attachment B). However, even though
these costs are unallowable for purposes of
computing charges to Federal awards, they
nonetheless must be treated as direct cost for
purposes of determining indirect cost rates
and-be allocated their share of the
organization's indirect costs if they represent
activities which (1) include the salaries of
personnel. (2) occupy space, and (3) benefit
from the organization's indirect costs. -
4. The costs of activities performed
primarily as a service to members, clients, or
the general public when significant and
necessary to the organization's mission must
be treated as direct costs whether or not
allowable and be allocated an equitable
share of indirect costs. Some examples of
these types of activities include:
a. Maintenance of membership rails.
subscriptions, publications, and related
functions. ,
b. Providing services and information to
members, legislative or administrative
bodies, or the public.
c. Promotion, lobbying, and other forms of
public relations.
d. Meetings and conferences except those
held to conduct the general administration of -.
the organization.
3. Maintenance, protection, and investment
of special funds not used in operation of the •
organization. • .
f. Administration of group benefits on
behalf of members or clients including life
and hospital insurance, annuity or retirement
plans, financial aid. etc.
C. indirect Cost.
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 paragraph
B.2. above. After direct costs have been
determined and assigned directly to awards '
or other work as appropriate, indirect coals
are those remaining to be allocated to .
benefiting cost objectivesJA cost may not be
allocated to an award as an indirect coal if
any other cost incurred for the same purpose.
in like circumstances, has been assigned to .
an award as a direct cost.
2. Because of the diverse characteristics. .
and accounting practices of nonprofit
organizations, it is not possible to specify the
types of costs which may be classified as
indirect cost in all situations. However. -
typical examples of indirect cost for many
nonprofit organizations may include
depreciation or use allowances 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.
D. Allocation of Indirect Costs and
Determination of Indirect Cost Rates.
1. General.
a. Where a nonprofit organization has only
one major function, or where all its major
functions benefit from its indirect costs to
approximately the sane degree, the
allocation of indirect costs and the
computation of an indirect cost rate may be
accomplished through simplified allocation
procedures as described in paragraph 2
below.
b. Where 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 benefiting
functions by means of a base which best
, measures the relative degree of benefit. The
indirect coats allocated to each function are
then distributed to individual 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 il devotes
to such activities as fund raising, 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 paragraphs Z
through S below.
e. The base period for the allocation of
indirect costs is the period in which such
costs an incurred and accumulated for
allocation to work performed in that period.
The base period normally should coincide
with the organisation's fiscal year, but in any
event shall 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 fii) 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 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 shall exclude capital expenditures and
unallowable costs. However, unallowable
costs which represent activities must be
included in the direct costs under the
conditions described in paragraph B.3. above.
• c. The distribution base may be total direct
costs (excluding capital expenditures and
other distorting items, such as major
subcontracts or subgrants). direct salaries
and wages, or other base which results in an
equitable distribution. The distribution base '
shall generally exclude participant support
costs as defined-in paragraph 29 of
Attachment B.
d. Except where a special rate(s) is
required in accordance with paragraph O.5
below, the indirect cost rate develocwd under
the above principles is applicable to aii
•t wards at the organization. If a special
rate{s) is required, appropriate modifications -
shall be made in order to develop the special
rate(s).
3. Multiple allocation base method.
a. Where an organization's indirect costs •
benefit its major functions in varying degrees.
such costs shall be accumulated into separate
cost groupings. Each grouping shall then be
allocated individually to benefiting functions
by means of a base which best measures the
relative benefits.
b. The groupings shall 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 allocation base which best
measures the relative benefits provided to
each function. The number of separate
groupings should be held within practical
limits, talcing into consideration the
materiality of the amounts involved and the
degree of precision desired.'
c. Actual conditions must be taken into
account in selecting the base to be used in
allocating the expenses in each grouping to
benefiting functions. When an allocation can
be made by assignment of a cost grouping
directly to the function benefited, the
allocation shall 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 Government and the organization, in
general any cost element or cost related
factor associated with the organization's
work is potentially adaptable for.use as an -
allocation base provided (i) it can readily be
expressed in terms of dollars or other •
quantitative measures (total direct costs.
direct salaries and wages, staff hours applied.
square feel used, hours of usage, number of
documents processed, population served, and
the like) and (ii) it is common to the
benefiting functions during the base period.
d Except where a special indirect cost
rate(s) ia required in accordance with
i
- 36 -
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46028
Federal Regbjer / Vol. 45. No. 132 / Tuesday. July 8. 1980 / Notices
IJ.S fielow >hir nt;f>am\tt
<,t inrlirm.l' i>«U allof.iitittl to <:;ir;h mdjor
(ufit.tiim shall be aggregutKd and treated as»
common pool for thai function. The costs in
Iht common pool shall then be distributed to
individual 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 total direct costs (excluding capital
expenditures and other distorting items such
as major subcontracts and subgrants), direct
salaries and wages, or other base which
results in an equitable distribution. The
distribution base shall generally exclude
participant support costs as defined in
paragraph 29. Attachment B. An indirect cost
rale should be developed for each separate
indirect cost pool developed. The rate in each
case should be slated as the percentage
which the amount of the particular indirect
cost pool is of the distribution base identified
with that pool
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)
fund raising, and (iii) other direct functions
(including protects 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 award or other •
activity using a base moat 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 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 ail other respects, the
organization's indirect coat rates shall be
computed in the same manner as that
described in paragraph D-2 above.
5. Special indirect cost rotas. In some.
instances, a single indirect coat rale for all
activities of an organisation 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
award or it may consist of work under a
group of awards performed in a common
environment. 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
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 indinct costs.
provisions should be made for a separate
indirect cost pool applicable to such work.
The separate indinct cost pool should be
developed during the'course of the regular
allocation process, and the separata indinct
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 paragraph 0.2.3,
and 4 above, and (ii) the volume of work to
which the rate would apply is material.
£ Negotiation and Approval of Indirect Cost
Kates.
1. Definitions. As used in this section, the
following terms have the meanings set forth
below:
a. "Cognizant agency" means the Federal
agency responsible for negotiating and
approving indirect cost rates for a nonprofit
organization on behalf of ail Federal
agencies.
b. "Predetermined rate" means an indinct
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 indinct 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 rale" means an indinct cost rat*
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 rale applicable to a
specified period which is used for funding,
interim reimbursement and reporting indirect
costs on awards pending the establishment of
a final rale for the period.
f. "Indinct cost proposal" means the
documentation prepared by an organization
to substantiate its claim for the
reimbursement of indinct 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 grant or
other work unit for which coat data an
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 rate*.
a. Unless different arrangements an
agreed to by the agencies concerned, the
Federal agency with the largest dollar value
of awards with an organization will be
designated as the cognisant agency for the
negotiation and approval of indirect coal
rates and. when 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 major long-term shift in the dollar volume
of the Federal awards to the organization. All
concerned Federal agencies shall 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 awards necessitate special
indinct cost rates in accordance with
paragraph D.S above, it will, prior to the time
the rates an negotiated, notify the cognizant
agency.
b. A nonprofit organization which iias noi
previously established an indirect cost rate
with a Federal agency shall submit its initial
indinct cost proposal to the cognizant
agency. The proposal shall be submitted as
soon as possible after the organization is
advised that an award will be made and. in
no event, later than three months after 'he
effective date of the award.
c. Organizations that have previously
established indirect cost rates must submit a
new indinct cost proposal to the cognizant
agency within six months after the ciose at
each fiscal year.
d. A predetermined rate may be negotiated
for use on awards when then is reasonable
assurance, based on past experience and
reliable projection of the organization's coats.
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 an not considered
appropriate. A fixed rate, however, shall not
be negotiated if (i) all or a substantial portion
of the organization's awards are expected to
expire before the carry-forward adjustment
can be made: (ii) the mix of Government and
non-government work at the organization is
too erratic to permit an equitable carry-
forward adjustment: or (iii) the organization's
operations fluctuate significantly from year *o
year.
f. Provisional and final rates shall be
negotiated when neither predetermined nor
fixed rates an appropriate.
g. The results of each negotiation shall be
formalized in a written agreement between
the cognizant agency and the nonprofit
organization. The cognizant agency shall
distribute 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 and the nonprofit organization, the
dispute shall be resolved in accordance with
the appeals procedure* of the cognizant
agency.
i. To the extent that problems are
encountered among the Federal agencies in
connection with the negotiation and approval
process, the Office of Management and
Budget wilt tend assistance as required to
nsolve such problems in a timely manner.
(Circular No. A-122)
Selected Ram of Coat
Table of Contents
1. Advertising costs
2. Bad debt*
3. Bid and proposal costs (reserved)
37
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Federal tester / Vot. 45. No. 132 / Tuesday. July v. 1980 / Notices
46027
4. Bonding cost*
5. Communication costs
8. Compensation for personal services
7. Contingency provisions
8. Contributions
9. Depreciation and use allowances
10. Donations • ' :; • .' •'
11. Employee morale, health and welfare -
costs and credit*
11 Entertainment coats . .
13. Equipment and other capital expenditures
• 14. Fines and penalties ; . -
15. Fringe benefits
16. Idle facilities and idle capacity
17, Independent research and development
(reserved) , .
18. Insurance and indemnification
19. interest, fund raising, and investment
management costs
20. Labor relations costs
21 .'Losses on other a wards . . ".
22. Maintenance and repair costs .- • ,.
23. Materials and supplies
24. Meetings, conferences -,
25; Memberships, subscriptions, and . •
professional activity costs
26. Organization costs 1 ,
27. Overtime, extra-pay shift, and multiahift.'
premiums
28. Page charges in professional journals
29. Participant support costs
30. Patent costs
31. Pension plans - -
32. Plant security costs
33. Preawerd costs
34. Professional service costs
35. Profits and losses on disposition of .
depreciable property or other capital
assets
36. Public information service costs
37. Publication and printing coats
38. Rearrangement and alteration costs
39. Reconversion costs
40. Recruiting costs
41. Relocation costs . ,
42. Rental costs .
. 43. Royalties and other costs for use of •
putents and copyrights
44. Severance pay
45. Specialized service facilities .
4«. Taxes /•• ^
47. Termination costs
, 48. Training and education costs
49. Transportation costs •
50. Travel costs - ".-"••
[Circular No. A-122] • •
Attachment B ' '
Selected items of Cost '
Paragraphs 1 through 50 provide principles' •
to be applied in establishing the allowability
of certain items of cost. These principles
apply whether a cost is treated as direct or
indirect. Failure to mention a particular item
of cost is not intended to imply that it is
. unallowable: rather determination as to.
allowability in each case should be based on
the treatment or principles provided for
similar or related items of cost.
1. Advertising costs.
a. Advertising costs mean the costs of
media services and associated costs. Media
advertising includes magazines, newspapers..
radio and television programs, direct mail..
exhibits, and the like.
b. The only advertising costs allowable are
those which are solely for (i) the recruitment
of personnel when considered in conjunction
with all other recruitment costs, as set forth
in paragraph 4ft (ii) the procurement of goods
and services: (iii) the disposal of surplus •
materials acquired in the performance of the
award except when organizations an
reimbursed for disposals at a predetermined '
amount in accordance with Attachment N of *
OMB Circular A-llft or (iv) specific
requirements of the award.
i Bad debts. Bad debts, including losses
(whether actual or estimated) arising from
uncollectible accounts and other claims.
related collection costs, and related legal
costs, are unallowable.
3. Bid and proposal emit, (reserved)
• 4. Bonding coats. ' •
" a. Bonding costs arise when the
Government requires assurance against
-:- financial loss to itself or others by reason of
the act or default of the organization. They .
•arise also in instances where the organization
requires similar assurance. Included are such
bonds as bid performance, payment.
advance payment, infringement, and fidelity ,
bonds.
b. Costs of bonding required pursuant to
the terms of the award are allowable.
c. Costa of bonding required by the
organization in the general conduct of its -
.operations are allowable to the extent that
such bonding is in accordance with sound
business practice and the rates and premiums
are reasonable under the circumstances.
•5. CootntuRKOtion costs. Costa incurred for
• telephone services, local and long distance
< telephone calls, telegrams, radiograms,
postage and the like, an allowable.
b. Compensation for personal services, ••
• a. Definition. Compensation for personal
•services includes all compensation paid
currently or accrued by the organization for
services of employees rendered during the
period of the award (except as otherwise
provided in paragraph g. below). It includes.
but is not limited to. salaries, wages.
director's and executive committee member's
fees, incentive awards, fringe benefits.
pension plan costs, allowances for off-site
pay, incentive pay, location allowance*.
hardship pay. and cost of living differentials.
b. Allowability. Except as otherwise
specifically provided in this paragraph, the
costs of such compensation an allowable to
the extent that: •
(1) Total compensation to individual
employees is reasonable for the services
rendered and conforms to the established
policy of the organization consistently
applied to both Government and non-
Government activities; and
(2) Charges to awards whether treated as .
direct or indirect coats an determined and
supported as required in this paragraph.
c. Reasonableness.
•' (1) When the organization ia predominantly
engaged in activities other than those
sponsored by the Government compensation
for employees on Government-sponsored
work will bo considered reasonable to the.
extent that it is consistent with that paid for
.similar work in the organization's other •
activities.
(2) When the organization is predominantly
engaged in Government-sponsored activities
and in cases where the kind of employees
required for the Government activities are -
not found in the organization's other •
activities, compensation for employees on
Government-sponsored work wiU be
considered reasonable to the extent that it is
comparable to that paid for similar work in - .
the labor markets in which the organization
competes for the kind of employees involved.'
•:. d. Special considerations in determining
allowability. Certain conditions require
special consideration end possible limitations
in determining costs under Federal awards
when amounts or types of compensation
appear unreasonable. Among such conditions
are the following; •
(1) Compensation to members of nonprofit
organizations, trustees, directors, associates.
officers, or the immediate families thereof. .
Determination should be made that such
compensation is reasonable, for the actual
personal services rendered rather than a
distribution of earnings in excess of costs.
(2) Any change in an organization's
compensation policy resulting in a
substantial increase in the organization's
level of compensation, particularly when it .
was concurrent with an increase in the ratio
. of Government awards to other activities of
the organization or any change in the
treatment of allowability of specific types of
compensation due to changes in Government
policy.
e. Unallowable cost*. Costs which are
• unallowable under other paragraphs of this
Attachment shall not be allowable under this"
paragraph solely on the basis that they
constitute personal compensation.
I Fringe benefits.
ft) Fringe benefits in the form of regular
compensation paid to employees during
periods of authorized absences from the job.
such as vacation leave, sick leave, military
leave, and the like, are allowable provided
such costs on absorbed by all organization
activities in proportion to the relative amount'
of time or effort actually devoted to each.
(2) Fringe benefits in the form of employer
contributions or expenses for social security,
employee insurance, workmen's
compensation insurance, pension plan costs
(see paragraph g. below), and the like, are
allowable provided such benefits are granted
in accordance with established written
organization policies. Such benefits whether
treated as indirect costs or as direct costs.
shall be distributed to particular awards and
other activities in a manner consistent with
the pattern of benefits accruing to the
individuals or group of employees whose
-salaries and: wages are chargeable to such
awards and other activities.
(3)(a) 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 t he
provision is made shall not exceed the
present value of the liability.
38
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48(08
Federal Register / Vol. 45, No. 132 / Tuesday, July a, 1980 / Notices
(b| Where an organization foliowi a
coniiitent policy of expensing actual
payments to. or on behalf of, employee* or
former employees for unemployment
compensation or worker*' compensation.
such payments are allowable in the year of.
payment with the prior approval of the
awarding agency provided they are allocated
to all actlvltiea of the organization.
(4) Costa of insurance on the lives of
trustees, officers, or other employees holding
positions of similar responsibility an
allowable only to the extent that the .
insurance represents additional
compensation. The costs of such insurance
when the organization is named as
beneficiary are unallowable.
g. Pennon plan cost*.
(1) Costs of the organisation's pension plan
which are incurred in accordance with the,
established policies of the organization an
allowable, provided?
(a) Such policies meet the lest of
reasonableness:
• (b) The methods of. cost allocation an not
discriminatory;
(c) The cost assigned to each fiscal year is
determined in accordance with generally
accepted accounting principles as prescribed
in Accounting Principles Board Opinion No. B
issued by the American institute of Certified
Public Accountants: and
(d) The costs assigned to a given fiscal year
an funded for all plan participants within six
months after the end of that year. However..
incnases to normal and past service pension
costs caused by a delay in funding the
actuarial liability beyond 30 days after each •
quarter of the year to which such costs an
assignable an unallowable..
(2) Pension plan termination insurance
premiums paid pursuant to the Employe*
Retirement income Security Act of 1974 (Pub.
L. 93-400) are allowable. Late payment
charges on such premiums are unallowable.
(3) Excise taxes on accumulated funding
deficiencies and other penalties imposed
under the Employee Relinment Income
Security Act an unallowable.
h. Incentive compeatation. Incentive
compensation to employees baaed on coat
reduction, or efficient performance.
suggestion awards, safety awards, etc.. an
allowable to the extent that the overall
compensation is determined to be reasonable
•nd such costs an paid or accrued pursuant
to an agreement entered into in good faith
between the organisation and the employees
before the services wen rendered, or
pursuant to an established plan followed by
• the organisation so consistently as to imply.
in effect, an agreement to make such
payment
i. Overtime, extra pay shift, and maltithift
premium*. See paragraph 27.
' j. Severance pay. See paragraph 44.
k. Training and education costs. See
paragraph 4»
1. Support of salaries and wage*.
(l) Charges to awards for salaries and
wages, whether treated aa direct costs or
indirect costs, will be based on documented
payrolls approved by e responsible officials)
of the organization. The distribution of
salaries and wages to awards must be
supported by personnel activity reports as
prescribed in subparagraph (2) below, except
when a substitute system has been approved
in writing by the the cognisant agency. {See
paragraph E2 of Attachment A)
(2) Reports reflecting the distribution of
activity of each employee must be
maintained for all staff members
(professionals and nonprofasskmals} whose
compensation is charged, in whole or in pan.
directly to awards. In addition, in order to
support me allocation of indirect costs, such
reports must also be maintained for other
employees whose work involves two or more
functions or activities if a distribution of their
compensation between such functions or
activities is needed in the determination of
the organization's indirect cost raters) (*.g~
an employee engaged part-time in indirect
cost activities and part-time in a direct
function). Reports maintained by nonprofit
organisations to satisfy these requirements
must meat the following standards:
(a) The reports must reflect an after-the-
fact determination of the actual activity of
each employee. Budget estimates (i.e..
estimates determined before the services an
performed) do not qualify as support for
charges to awards.
(b) Each report must account for the total
activity for which employees an ;
compensated and which is required in
fulfillment of their obligations to the '
organization.
(c) The reports must be signed by the
individual employee, or by a responsible
supervisory official having first hand . .
knowledge of the activities performed by the
employee, that the distribution of activity
represents a reasonable estimate of the
actual work performed by the employee
during the periods covered by the reports.
(d) The reports mast be prepared at least
monthly and must coincide with one or more
pay periods.
(3) Charges for the salaries and wages of
nonprofessional employees, in addition to the
supporting documentation described in
sufaparagrapha (I) and (2) above, must also
be supported by records indicating the total
number of hours worked each day
maintained in conformant* with Department
of Labor regulations implementing the Fair
Labor Standards Act (29 CFR Part 516). For
this purpose, the term "nonprofessional
employee" shall have the same meaning aa
"nonexempt employee." under the Fair Labor .
Standards Act
(4) Salaries and wages of employees used
in meeting coat ^"""g or
requirements on awards must be supported in
the same manner aa salaries and wages
claimed for reimbursement from awarding
agendas.
7. Contingency pro vision*. Contributions to
a contingency reserve or any similar
provision made for events the occurrence of
which cannot be foretold with certainty aa to
time, intensity, or with an assurance of their
happening, an unallowable. The term
"contingency rasanre" excludes self*
insurance reserves (sea paragraph 8,f.(3) and
18.a.(2)(d)); pension funds (sea paragraph
Q.(g)|; and reserves for normal severance pay
(see paragraph 44.(b){i).
8. Contribution*. Contributions and
donations by the organization to others are
unallowable.4
9. Depreciation and use allowance*.
a. Compensation for the use of buildings.
other capital improvements, and equipment
on hand may be mad* through us*
allowance* or depreciation. However, except
as provided in paragraph f. below a
combination of lha two methods may not be
used in connection with a single class of
fixed assets (e.g.. buildings, office equipment.
computer equipment, etc.).
b. The computation of use allowances or
depreciation shall be based on the
acquisition cost of the assets involved. The '
acquisition cost of an asset donated to the
organization by a third party shall be its lair
market value at the time of the donation.
c. The computation of use allowances or
depreciation 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
presently resides; and
(3) Any portion of the cost of buildings and
equipment contributed by or for the
organization in satisfaction of a statutory
matching retirement.
d. Where the us* allowance method is
followed, the use allowance for buildings and
improvement (including land improvements
. such as paved parking areas, fences, and
sidewalks) will b* computed at an annual
rate not exceeding two percent of acquisition
cost The use allowance for equipment will
be computed at an annual rate not exceeding
six and two-thirds percent of acquisition cost.
When the us* allowance method is used for
buildings, the entire building must be treated
as a single asset the building's components
(e.g. plumbing system, heating and air
conditioning, etc.) cannot be segregated from
the building's shell. The two percent
limitation, however, need not be applied to
equipment which is merely attached or
fastened to the building but not permanently
fixed to it and which is used as furnishings or
decorations or for specialized purposes (e.g.,
dentist chairs and dental treatment units.
counters, laboratory benches bolted to the
floor, dishwashers, carpeting, etc.). Such
equipment will be considered a* not being
permanently fixed to the building if. it can be
removed without the need for costly or
extensive alterations or repairs to the
building or the equipment. Equipment that
meets these criteria will be subject to the six
and two-thirds percent equipment use
allowance limitation.
e. Where depreciation method is followed.
the period of useful service (useful life)
established in each case for usable capital
assets must take into consideration such
factors a* type of construction, nature of the
equipment used, technological developments
in the particular program ana. and the -
. nnewal and replacement policies followed
for the the individual items or classes of
assets involved. The method of depreciation
used to assign the cost of an asset (or group
of assets) to accounting periods-shall 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 or lesser in the early portions of us
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Federal Ragistar / Vol. 45. No. 132 / Tuesday. July & 1980 / Notices
useful tiltr !h»n in lh» lal*r portion*, 'the
*ir
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46030
Federal Register / Vol. 45, No. 132 / Tuesday, July 8. 1980 / Notices
ft) "Facilities" mttim land xnd buildings or
any portion thereof, equipment individually
or collectively, or any other tangible capital
asset, wherever loaned, and whether owned
or leased by ihe organization.
(2) "Idle facilities" means completely
unused facilities that are excess to the
organization's current needs.
(3) "Idle capacity" means the unused
capacity of partially used facilities/It is the
different* between that which a facility
could achieve under 100 per cent operating
time on a one-shift basis less operating
interruption* resulting from lime lost SOT
repairs, setups, unsatisfactory materials, and
other normal delays, and the extent to which
. the facility was actually used to meet
demands during the accounting period. A
multishift basis may be used if it can be
shown that this amount of usage could
normally be expected for the type of facility
involved.
(4) "Costs of idle facilities or idle capacity" •
means costs such as maintenance, repair.
housing, rent, and other related costs: e.g..
properly taxes, insurance, and depreciation
or use allowances.
b. The costs of idle facilities are
unallowable except to the extent that
(1) They are necessary to meet fluctuations
in workload: 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 aot have been
reasonably foreseen. Under the exception
slated in this subparagraph. costs of idle
facilities are allowable for a reasonable
period of time, ordinarily not to exceed one
year, depending upon the initiative taken to
use, lease, or dispose'of such facilities (but
see paragraphs 47.o. and d.).
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 an
allowable, provided the capacity is
reasonably anticipated to be necessary or
was originally reasonable and is not subject
to reduction or elimination by subletting,
renting, or sale, in accordance with sound
business, economics, or security practices.
Widespread idle capacity throughout an
entire facility or among a group of assets
having substantially the same function may
be idle facilities.
17. Independent research and development
(Reserved!.
18. Insurance and indemnification.
a. Insurance includes insurance which the
organization ia required to cany, or which is
approved.' under the terms of the award and
any other insurance which the organization
maintains in connection with the general
conduct of its operations. This paragraph
does not apply to insurance which represents
fringe benefits for employees (see paragraph
e.f.8nd6.g.(2J).
(1) Cost* of insurance required or
approved, and maintained, pursuant to the
award are allowable.
(2) Costs of other insurance maintained by
Ihe organization in connection with the
general conduct of its operations are
nllowable subject to the following limitations.
(u) Types and extent of coverage shall be
in accordance with sound business practice
and the rates and premiums shall be
reasonable under the circumstances.
(b) Costs allowed for business Interruption
or other similar insurance shall be limited to
exclude coverage of management fees.
(c) Costa of insurance or of any provisions
for a reserve covering the risk of loss or
damage to Government property are
allowable only to the extent that the
organization is liable for such loss or damage.
(d) Provisions for a reserve under a self-
insurance program an allowable to the
extent that types of coverage, extent of
coverage, rates, and premiums would have
been allowed had insurance been purchased
lo 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 shall not exceed the present value of
the liability.
(a) 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 paragraph 6). The cost of
such insurance when the organization ia
identified as the beneficiary is unallowable.
(3) Actual losses which could have been
covered by permissible insurance (through
the purchase of insurance or a self-insurance
program) are unallowable unless expressly
provided for in the award, except: •
(a) Coats incurred because of losses not
covered under nominal deductible insurance
coverage provided in keeping with sound
business practice are allowable.
(b} Minor loaaes not covered by insurance.
such aa spoilage, breakage, and
disappearance of supplies, which occur ia the
ordinary course of operations, are allowable.
b. Indemnification includes securing the
organization against liabilities to third
person* and any other loas or damage, not
compensated by insurance or otherwise. The
Government is obligated to indemnify the
organization only to the extent expressly
provided in the award.
19. Interest. fluid re/ring, and ianttmmt
a. Costs incurred: for interest on bonowed
capital or temporary use of endowment
fund*, however represented, are unallowable.
b. Costs of organized fund raising,
including financial campaigns, endowment
drive*, solicitation of gift* and bequests, and
similar expenses incurred solely to raise
capital or obtain contributions are
unallowable.
c- Cost* of investment counsel and staff
and similar expenses incurred solely to
enhance income from investments an
unallowable.
d. Fund raiting and investment activities
shall be allocated an appropriate share of
indirect cost* under the condition* described
in paragraph B of Attachment A,
20. Labor relation* cost*. Costs incurred in
maintaining satisfactory relation* between
the organization and it* employee*, including
costs of labor management committee*.
employee publications, and other reluted
activities ore allowable.
21. IMUBS on other award*. Any excuss of
cost* over Income on any award is
unallowable a* a cost of any other award.
This include*, but is not limited lo, the
organization's contributed portion by reason
of cost sharing agreements or any
underrecoverie* through negotiation of lump
sum* for. or ceiling* on, indirect colts,
22. Maintenance and repair cottt. Costs
incurred for necessary maintenance, repair.
or upkeep of buildings and equipment
(including Government 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
building* and equipment or appreciably
prolong their intended life snail be treated as
capital expenditure* (see paragraph 131-
23. Materials and supplies. The costs of
materials and supplies necessary to carry out
an award are allowable. Such cost* should be
charged at their actual price* after deducting
all cash discounts, trade discounts, rebates.
and allowance* received by the organization.
Withdrawals from general store* or
stockrooms should be charged at cost under
any recognized method of pricing
consistently applied. Incoming transportation
charges may be a proper part of material
coat Material* and supplies charged a* a
direct cost should include only the materials
and supplies actually used for the
performance of the contract or grant, and due
credit should be given for any excess
materials or supplies retained, or returned to
vendor*.
24. Meetings, conferences.
a. Co*t* associated with the conduct of
meetings and conferences, include the cost of
renting facilities, meal*, speakers' fees, and
the like, But see paragraph 12. Entertainment
costs, and paragraph 28. Participant support
costs.
b. To the extent that these costs are
identifiable with a particular cost objective,
they should be charged to that objective. (See
paragraph ft of Attachment A.} These costs
are allowable provided that they meet the
general teat* of allowability. shown in
Attachment A to this Circular.
c Cost* of meetings and conference* held
to conduct the general administration of the
organization are allowable.
25. Memberships, subscriptions, and
professional activity costs.
a. Costs of the organization's membership
in civic, business, technical and professional,
organizations are allowable.
b. Coat* of the organization'* subscriptions
to civic, business. professional, and technical
periodical* are allowable.
c. Coat* of attendance at meeting* and
conference* sponsored by other* when the
primary purpoM i* the dissemination of
technical information, an allowable. This
includes costs of meals, transportation, and
other item* incidental to such attendance.
28. Organization easts. Expenditures, such
a* incorporation fees, brokers' fees, fees (a
promoters, organizers or management
consultants, attorneys, accountants, or
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Federal i>.«gbter / Vol. 45. No. 132 / Tuesday. July ». 1980 / Notices
46031
invettfflent counselors. whether or not
employees of the organization, in connection
with establishment or reorganization of an
organization, are unallowable except with
prior approval of the awarding agency.
27. Overtime, extra-pay thift,-aad .
multishift premiums. Premium* for overtime,
extra-pay shifts, and nmltishifl work an ' •
allowable only with the prior approval of the
awarding agency except: .
• a. When necesiary to cope with
emergencies, such as those resulting from
,~. accidents, natural disasters, breakdowns of
equipment, or occasional operational •••
bottlenecks of a sporadic nature. '
b. When employees are performing indirect
functions such as administration.
maintenance, or accounting.
c. In the performance of tests, laboratory.
procedures, or'olher similar operations which
are continuous in nature and cannot . .
reasonably be interrupted or otherwise '
completed.
d. When lower overall cost to the
Government will result. - ,
28. Page charges in professional journals.
Page charges for professional journal -
publications are allowable as a necessary
part of research costs, where:
a. The research papers report work
supported by the Government; and ' ,--•• ' •_
b. the charges are levied impartially on all .
research papers published by the journal.
whether or not by Government-sponsored
author*. .
29. Participant support costs. Participant
support costs are direct coats 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 meetings,
conferences, symposia, or training protects.
These costs an allowable with the prior
approval of the awarding agency.
30. Patent costs.
a. Costs of (i) preparing disclosures,
reports, and other documents required by the
award and of searching the art to the extend
necessary to make such disclosures, (ii) •
preparing documents and any other patent
costs in connection with the filing and
prosecution of a United state* patent
application when title or royalty-free license
is required by the Government to be -
•conveyed to the Government, and (Hi)'general
counseling services relating to patent and - •
copyright matter*, such as advice on patent
. and copyright laws, regulations, clause*, and'
employee agreements an allowable (but see
.paragraph 34). •_..-.
• b. Cost of preparing disclosures, reports,
' and other document* and of searching the art
to the extent necessary, to make disclosure*.
if not required by the award, an .. ,
unallowable. Costs in connection with (i)
filing and prosecuting any foreign patent
application, or (ii) any United Slates patent
application, where the award doe* not
. require conveying title or a royally-free
license to the Government, an unallowable •
(also see paragraph 43).
31. Pension plans. See paragraph 6. g.
32. Plant security costs. Necessary *
expenses incurred to comply with
Government security requirement* or for
facilities protection, including wage*.
uniform*, and equipment of personnel are
allowable.
- 33. Preaward cost*. Preaward costs an
those incurred prior to the effective date of
the award directly pursuant to the
negotiation and in anticipation of the award
when such coat* is necessary to comply with
the proposed delivery schedule or period of .
performance. Such cost* an allowable only
to the extent that they would have been
allowable if incurred after the date of the
award and only with the written approval of
the awarding agency.
34. Professional service costs.
a. Costs of professional and consultant
services rendered by persons who an
members of a particular profession or possess
a special skill and who an not officer* or -
employee* of the organization, an allowable.
subject to b, c. and d. of this paragraph when
reasonable in relation to the service*
rendered and when not contingent upon
recovery of die costs from the Government.
b. In determing the allowability of costs in
a particular case, no single factor or any
special combination of factors is necessarily
determinative. However, the following -
. factor* an relevant:
(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 organization'*
capability in the particular ana.
(3) The past pattern of such coat*. '
particularly in the year* prior to Government
award*.
(4) The impact of Government award* on
the organisation's business (Le.. what new
problems have arisen).
(5) Whether the proportion of Government
work to the organisation1* total business i*
such a* to influence the organization in favor
of incurring the cost particularly where the
service* rendered ere not of a continuing -
nature and have little relationship to work
under Government grant* and contracts.
(0) Whether the service can be performed
more economically by direct employment
rather dun contracting. :
(?) The qualification* of the individual or
concern rendering the service and the
customary fees charged, especially on non-
Goventment awards.
(B) Adequacy of the contractual agreement •
for the service (e.g» description of the service.
estimate of time required, rate of
compensation, and termination provision*}.
. c. In addition to the factors in paragraph b
above, retainer fee* to be allowable must be '
supported by evidence of bona fide services
available or rendered,
d. Cost of legal accounting, and consulting
services, and related costs incurred in
connection with defense of antitrust suit*.'
and the prosecution of claims against the
Government an unallowable. Costs of legal.
accounting and consulting services, and
related coots, incurred in connection with
patent infringement litigsnon. organization
and reorganization, an unallowable unless
otherwise provided for in the award (but see
paragraph 47*}.
3& Profits and /asset an disposition of
tupnaoou property of otMf- copitoi assess.
s. (1) Cain* and losses on sale, retirement
• or other disposition of depreciable property
shall be included in the year in which they
occur as credits or charges to cost grouping!s)
in which the depreciation applicable to such
property wa* included. The amount of the
gain or loss to.be included a* a credit or •
charge to the appropriate cost groupingfs)
shall be the difference between the amount
realized on the property and the
undepreciated basis of the property.
(2) Gain* and losses on the disposition of
depreciable property shall not be recognized
• as a separate credit or charge under the
following conditions:' •
(a) The gain or toss is processed through a
depreciation reserve account and is reflected -
in the depreciation allowable under
paragraph?.'
(b) The property is given in exchange as
part of the purchase price of a similar item
and the gain or loss i* taken into account in'
determining the depreciation cost basis of the
new item.
(c) A loss results from the failure to -
maintain permissible insurance, except a*
otherwise provided in paragraph tfta.(3).
(d) Compensation for the use of the
property, was provided through use
allowances in lieu of depreciation in
accordance with paragraph 9.
(e) Gains and losses arising from mass or
extraordinary sales, retirements, or other.
dispositions shall be considered on a case-
by-case basis.
b. Gains or losses of any nature arising-
(ram the sale or exchange of property other
then the property covered in paragraph a.
above shall be excluded In computing award
costs.
38. Public information serif tee cost*.
a. Public information service costs include
the cost associated with pamphlets, news
releases, and other forms of information
services. Such costs an normally incurred to:
(1) Inform or instruct individuals, groups, or
the general public.
(2f Interest individual* or group* in
participating in a service program of the .
organization.
(3) Disseminate the results of sponsored
and nonsponsond activities.
b. Public information service costs are
allowable as direct costs with the prior
approval of the awarding agency. Such costs
an unallowable as indirect costs.
37. Publication and printing costs.
a. Publication costs include the cost* of
printing (innhidlng the processes of
composition, plate-making, press work.
binding, and the end products produced by .
such processes}, distribution, promotion.
. mailing, and general handling.
b. If these costs era not identifiable with a
particular cost objective, they should be
allocated ss indirect cost* to all benefiting *
activities of the organization.
c* PuDucation and printing} coats an '
unallowable aa direct costs except with the
prior approval of the awarding agency.
d The cost of page charges in journals i*
addressed pengnpo 2&
38 Asorjuiiyeflisii/ ooof o/farofioji oaen*.
Costs incurred for ordinary or normal
rearrangement and alteration of facilities ere
allowable. Special arrangement and
alteration costs incurred specifically for the
profect an allowable with the prior approval
of the awarding agency.
42
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48032
Federal Register / Vol. 45. No. 132 / Tuesday. July 8. 1980 / Notices
38 Reconvenion costs. Costs incurred in
the reiteration or rehabilitation of the
organization's facilities to approximately the
same condition existing immediately prior to
commencement of Government awards, fair
wear and tear excepted. ore allowable.
40. Recruiting costs. The following
recruiting costs are allowable: cost of "help
wanted" advertising, operating costs of an
employment office, costs of operating an
educational testing program, travel expenses
including food and lodging 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 (ice paragraph 41c). Where the
organization uses employment agencies.
costs not in excess of standard commercial
rates for such services' are allowable.
41. Relocation costs.
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
limitation described in paragraphs b. c. and d.
below, 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 ore limited to the following: ,
(i) The costs of transportation of the
employee, members of his 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 a
maximum, period of 30 days, including
advance trip time.
(3) Cosing 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) below,
are limited to 8 per cent of the sales price of
the employee's former home.
(4) The continuing costs of ownership 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 Axing up
expenses), utilities, taxes, and property
insurance.
. (S) Other necessary and reasonable
expenses normally incident to relocation.
such as the costs of cancelling an unexpired
lease, disconnecting and reinstalling
household appliances, and purchasing
insurance against loss of or damages to
personal property. The cost of cancelling an
unexpired lease is limited to three times the
monthly rental.
c. Allowable relocation costs for new
employees are limited to those described in
(1) and (2) of paragraph b. above. When
relocation costs incurred incident to the
recruitment of new employees have been
allowed either «s a direct or indirect cost and
the employee resigns for reasons within his
control within 12 months after hire, the
organization shall refund or credit the
Government for its share of the cost.
However, the costs of travel to en overseas
location shall be considered travel cost* in
accordance with paragraph 50 and not
relocation costs for the purpose of this
paragraph if dependents are not permitted at
the location for any reason and the cost* do
not include cost* of transporting household
goods.
d. The following cost* related to relocation
are unallowable:
(I) Fee* 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 on employee
related to reimbursed relocation cost*.
&. Rental cottt.
a. Subject to the limitations described in
paragraphs b. through d. of this paragraph.
rental cost* are allowable to the extent that
the rates are reasonable in light of such
factors as: rental costs of comparable
property, if any; market condition* in the
area: alternative* available: and the type, life
expectancy, condition, end value of the
property leased.
b. Rental costs under sale end leeseback
arrangements are allowable only up to the
amount that would be allowed had the
organization continued to own the property.
c. Rental cost* under less-than-leitgth
leases are allowable only up to the amount
that would be allowed had title to the
property vested in the organization. For this
purpose, a lesa-than-erms-length lease is one
under which one party to the lease agreement
i* able to control or substantially influence
the actions of the other. Such leases include.
but are not limited to those between (i)
divisions of on organization: fiil organizations
under common control through common
officers, directors, or members: and (ill) an
organization and a director, trustee, officer.
or key employee of the organization or his
immediate family either directly or through
corporation*, trusts, or similar arrangement*
in which they hold a controlling interest
4 Rental cost* under leases which create a
material equity in the leased property ore
allowable only up to the amount that would
be allowed had the organization purchased
the property an the date the lease agreement
was executed: e.g., depreciation or use
allowances, maintenance, taxes, insurance
but excluding interest expense and other
unallowable costs. For this purpose, a
material equity in the property exist* if the
lease in noncancelable or is cancelable only
upon the occurrence of some remote
contingency and has one or more of the
following characteristics:
(1) The organization has the right to
purchase the property for a price which at the
beginning of the lease appears to be
substantially less than the probable fair
market value at the time it i* permitted to
purchase the property (commonly called a
lease with a bargain purchase option):
(2) Title to the property passes to the
organization at some time during or after the
lease period:
(3) The term of the lease (initial term plus
period* covered by bargain renewal options.
if any) is equal to 75 per cent or more of the
economic life of the leased property: i.e.. the
period the property i* expected to be
economically usable by one or more users.
43. Royaltia* and other cottt for 0*9 of
patent* and copyright*.
a. Royalties on a patent or copyright or
amortization of the cost of acquiring by
purchase a copyright, patent or right*
thereto, necessary for the proper performance
of the award an allowable unless:
(1) The Government has a license or the
right to free use of the patent or copyright.
(2) The patent or copyright ha* been
adjudicated to be invalid, or has been
administratively determined to be invalid.
(3) The patent or copyright is considered to
be unenforceable.
(4) The patent or copyright i* expired.
b. Special care should be exercised in
determining reasonableness where the
royalties may have been arrived at a* a result
of less then arm's length bargaining; e.g.:
(I) Royalties paid to persons, including
corporations, affiliated with the organization.
(2) Royalties paid to unaffiliaied parties.
including corporations, under an agreement
entered into in contemplation that a
Government award would be mode.
(3} Royalties paid under an agreement
entered into after an award ie made to an
organization.
c. In any case involving a patent or
copyright formerly owned by the
organization, the amount of royalty allowed
should not exceed the cost which would have
been allowed had the organization retained
title thereto.
44. Severance pay.
a. Severance pay, also commonly referred
to es dismissal wage*, i* a payment in
addition to regular salaries and wages, by
organizations to workers whose employment
is being terminated. Cost* of severance pay
an allowable only to the extent that in each
case, it is required by (i) law, (ii) employer-
employee agreement (iii) established policy
that constitute*, in effect, an implied
agreement on the organization's part, or (iv)
eircununancee of the particular employment.
b. Coat* of severance payment* are. divided
into two categories a* follows:
(1) Actual normal turnover severance
payment* shall be allocated to all activities:
or, where the organization provide* for a
reserve for normal severance* such method
will be acceptable if the charge to current
operation* i* 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
organization.
(2) Abnormal or man severance pay is of
such a conjectural nature that measurement
of cost* by mean* of an accrual will not
achieve equity to both parties. Thus, accruals
for this purpose an not allowable. However.
the Government recognize* it* obligation to
participate to the extent of it* fair share, in
any specific payment Thus, ailowability will
be considered on a case-by-case basis in the
evant of occurrence.
45. Specialized service facilities.
a. The cost* of services provided by highly
complex or specialized facilities operated by
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Federal RegiitBr / Vol. 45. No. 132 / Tuesday. July 6. 1980 / Notices 46033
(he organization, such as electronic
computer! and wind tunnels, an allowable
provided the charges Tor the service* meet
the conditions of either b. or c. of this
paragraph and. in addition, take into account
any items of income orTFederal financing that
qualify as applicable credits under paragraph
A. 5. of Attachment A.
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" (i) does
not discriminate against federally supported
activities of the organization, including usage'
by the organization for internal purposes, and
(ii) is designed to recover only the aggregate
costs of the services. The costs of each
service shall consist normally of both its
direct costs and its allocable share of all"
indirect costs. Advance agreements pursuant
' lo paragraph A.6. of Attachment A are
particularly important in this situation.
c. Where the costs incurred for a service
are not material, they may be allocated as
indirect costs.
46, Taxes.
a. In general, taxes which the organization
is required to pay and which are paid or
accrued in accordance with generally
accepted accounting principles, 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 organization
directly or which are available to the
organization based on an exemption afforded
the Government and in the latter case when
the awarding agency makes available the
necessary exemption certificates, (ii) special
assessments on land which represent capital
improvements, and (iii) Federal income taxes.
b. Any refund of taxes, and any payment to
the organization of interest thereon, which
were allowed as award costs, will be
credited either as a cost reduction or cash
refund, as appropriate, to the Government.
47. Termination costs. Termination of
awards generally give rise to the incurrence
of costs, or the need for special treatment of
costs, which would not have arisen had the -
award not been terminated. Cost principle!
covering these items are set forth below.
They are to be used in conjunction with the
other provisions of this Circular in
termination situations.
a. Common items. The cost of items
reasonably usable on the organization's other
work shall not be allowable unless the
organization submits evidence that it would
not retain such items at coat without
sustaining a loss. In deciding whether such
items are reasonably usable on other work of
the organization, the awarding agency should
consider the organization's plans and orders
for current and scheduled activity.
Contemporaneous purchases of common
items by the organization shall be regarded
as evidence that such items an reasonably
usable on the organization's other work. Any
acceptance of common items as allocable to
the terminated portion of the award shall 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. Costa continuing after termination. If in
a particular case, despite all reasonable
efforts by the organization, certain costs
cannot be discontinued immediately after the
effective date of termination, such costs are
generally allowable within the limitations set
forth in this Circular, except that any such
costs continuing after termination due to the
negligent or willful'failure of the organization
to discontinue such costs shell be
unallowable.
. c. Loss of useful value. Loss of useful value
of special tooling, machinery and equipment
which was not charged to the award as a
capital expenditure is generally allowable if:
ill Such special tooting, machinery, or
equipment is not reasonably capable of use in
the other work of the organization.
(2) The interest of the Government la
protected by transfer of tide or by other
means deemed appropriate by the awarding
agency;
d. Rental costs. Rental costs under
unexpired leases are generally allowable
where clearly shown to have been
reasonably necessary for the performance of
the terminated award less the residual value
of such leases, if (i) the amount of such rental
claimed does not exceed the reasonable use
value of the property leased for the period, of
the award and such further period as may be
reasonable, and (ii) the organization nuke*
all reasonable efforts to terminate, assign, , .
settle, or otherwise reduce the cost of soph
lease. There also may be included the cost of
alterations of such leased property, provided-
such alterations were necessary for the
performance of the award, and of reasonable
restoration required by the provisions of the
lease. ' • ' .
• e. Settlement expenses. Settlement
expenses including the following are
generally allowable: . .
(1) Accounting, legal, clerical and similar •
costs reasonably necessary for
(a) The preparation and presentation to
awarding agency of settlement claims and
supporting date with respect to the
terminated portion of the award, unless the
termination is for default (See paragraph 4,a.
of Attachment U OMB Circular No. A-llft
and
(b) The termination and settlement of
subawards. •
(2) Reasonable costs for the storage.
transportation, protection, and disposition of
property provided by the Government or '
acquired or produced for the award: except
when grantee* are reimbursed for disposals
at a predetermined amount in accordance
with Attachment N of OMB Circular A-110.
(3) Indirect costs related to salaries end '
wages incurred as settlement expenses in
subparagnpha (1) and (2) of this paragraph.
Normally, such indirect costs shall be limited
to fringe benefits, occupancy cost and
immediate supervision.
f. Claims under subawards. Claims under
subawards, including the allocable portion of
claim* which are common to the award, and
lo other work of the organization an
generally allowable. An appropriate share of
the organization's indirect expense may be
allocated to the amount of settlement* with
subcontnctor/subgrantees: provided that the
amount allocated is otherwise consistent
with the basic guidelines contained in
Attachment A. The indirect expense so
allocated shall exclude the same and similar
costs claimed directly or indirectly as
settlement expenses.
48. Training and education costt. "
a. Costs of preparation and maintenance of
a program of instruction including but not
limited to on-ihe-job. classroom, and
apprenticeship training, designed to increase
the vocational effectiveness of employee*.
including training materials, textbooks,
salaries or wages of trainees (excluding
overtime compensation which might arise.
therefrom), and (i) salaries of the director of
training and staff when'the training program
is conducted by the organization: or (ii)
tuition and fees when die training is in an
institution not operated by the organization.
an allowable.
b. Costs of part-time education, at an
undergraduate or postgraduate'college level.
including that provided at the organization1*
own facilities, are allowable only when the.
course or degree punned is relative to the
field in which the employee is now working
or may reasonably be expected to work, and
an limited to:
(1) Training materials.
(2} Textbook*.
(3) Pee* charge* by the educational .
institution.
(4) Tuition charged by the educational
institution, or in lieu of tuition, instructors'
salaries and the related share of indirect
coats of the educational institution to the
extent that the sura thereof i* not in excess of.-
the tuition which would have ben paid to the
participating educational institution. .
(S) Salaries and related co*t* of instructors
who an employee* of the organization.
(8) Straight-time compensation of each .
employee for time spent attending classes
during working hours not in excess of 156 •
hours per year and only to the extent that
circumstances do not permit the operation of
classes or attendance at classes after regular
working hours: otherwise such compensation
i* unallowable.
c. Costs of tuition, fee*, training material*.
and textbook* (but not subsistence, salary, or -
any other emoluments) in connection with
full-time education, including that provided at
the organization's own facilities, at a
postgraduate (but not undergraduate) college
level, an allowable only when the course or
degree pursued i* related to the Reid In which
the employee i* now working or may
reasonably be expected to work, and only
" when the coat* receive the prior approval of
the awarding agency. Such coats an limited
to the cost* attributable to a total period not
to exceed one school year, for each employee
10 trained In unusual cases the period may
be extended.
d Cost* of attendance of up to 18 week*
per employee per year at specialized
program* specifically designed to enhance
the effectiveness of executive* or managers
or to prepare employee* for such positions
an allowable. Such cost* include enrollment
fee*, training materials, textbooks and
related charge*, employee*' salaries. .
subsistence, and travel. Cost* allowable
under this paragraph do not include those for
courses that an pan of a degree-oriented
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46034
F«d«nl Jtogtittr / Vol. 45. No. 132 / Tumtoy. July 8.1990 / Notice
curriculum, which are allowable only to the
txtent let forth in b. and c. above.
e. Maintenance expense, and normal
depreciation or fair rental, on facilities
owned or leased by the organisation for
training purpose! are allowable to the extent
MI forth in paragraphs 9.22, and 42.
f. Contribution* or donation* to
educational or training institution*, including
the donation of facilities or other properties.
and scholarships or fellowships, are
unallowable.
g. Training and education costs in excess of
those otherwise allowable under paragraphs
b. and c. of this paragraph may be allowed
with prior approval of the awarding agency.
To be considered for approval the
organisation must demonstrate that such
cost* are consistently incurred pursuant to an
established training and education program*
and thai the course or degree pursued is
relative to the field in which the employee is
now working or may reasonably be expected
to work.
49. Transportation costs. Transportation
costs include freight, express, cartage, and
postage charges relating either to goods
purchased, in process, or delivered* Thesk
costs are allowable. When such cost* can
readily be identified with the items involved.
they may be directly charged as
transportation costs or added to the cost of
such items (see paragraph 23). Where
identification with the materials received
cannot readily be made, transportation costs
may be charged to the appropriate indirect
cost accounts if the organization follows a
consistent, equitable procedure in this .
respect.
SO. Travel cotu.
a. Travel cost* are the expenses for
transportation, lodging, subsistence, and-
related item* incurred by employees who are
in travel status on official business of the
organization. Travel costs are allowable
subject to paragraphs b. through e. below.
when they are directly attributable to specific
work under an award or are incurred in the
normal course of administra lion of the
organization.
b. Such costs may be charged on an actual
basis, on a per diem or mileage basis in lieu
of actual coats incurred, or on a combination
of the two. provided the method used result*
in charges consistent with those normally
allowed by the organization in ita regular
operation*.
c. The difference in cost between first-class
air accommodations and less than first-class
air accommodations is unallowable except
when less than first-class air
accommodations are not reasonably
available to meet necessary mission
requirements, such as where las* than first-
class accommodations would (i) require
circuitous routing, (ii) require travel during
unreasonable hours, (iii) greatly increase the
duration of the flight, (iv) result in additional
costs which would offset the transportation
savings, or (v) offer accommodations which
are not reasonably adequate for the medical
needs of the traveler.
d. Necessary and reasonable costs of
family movement* and personnel movements
of a special or mass nature are allowable.
pursuant to paragraphs 40 and 41. subject to
allocation on the basis of work or time period
benefited when appropriate. Advance
agreements are particularly important
e. Direct charges for foreign travel costs are
allowable only when the travel has received
prior approval of the awarding agency. Each
separate foreign trip must be approved. For
purposes of this provision, foreign travel is
defined as any travel outside of Canada and
ihe United Slates and Its territories and
possessions. However, for an organisation
located in foreign countries, the term "foreign
travel" means travel outside that country.
[Circular No. A-122)
AttachmatC
Noopnffl Organization no* SobfM to ttt»
Oreular
Aerospace Corporation. El Segundo.
California
Argonne Universities Association. Chicago,
Illinois
Associated Universities. Incorporated.
Washington. O.C
Associated Universities for Research and
Astronomy. Tucson. Arizona)
Atomic Casualty Commission. Washington,
D.C
Battelle Memorial Institute. Headquartered in
Columbus. Ohio
Brookhaven National Laboratory. Upton.
New York
Center for Energy and Environmental
Research (GEEK), (University of Puerto
Rico) Commonwealth of Puerto Rico
Charles Stark Draper Laboratory,
Incorporated. Cambridge. Massachusetts
Comparative Animal Research Laboratory
(CARL)
(University of Tennessee). Oak Ridge.
Tennessee
Environmental Institute of Michigan. Ann
Arbor. Michigan
Hanford Environmental Health Foundation,
Richland. Washington
UT Research Institute. Chicago. Illinois
Institute for Defense Analysis. Arlington.
Virginia
Institute of Gas Technology, Chicago, Illinois
Midwest Research Institute, Headquartered
in Kansas City. Missouri
Mitre Corporation. Bedford. Massachusetts
Montana Energy Research and Development
Institute. Inc. (MERDI). Butte, Montana
National Radiological Astronomy
Observatory. Green Bank. West Virginia
Oak Ridge Associated Universities. Oak
Ridge, Tennessee
Project Management Corporation. Oak Ridge.
Tennessee
Rand Corporation, Santa Monica, California
Research Triangle Institute. Research
Triangle Park. North Carolina
Riverside Research Institute, New York. New
York
Sandia Corporation. Albuquerque, New
Mexico
Southern Research Institute. Birmingham.
Alabama
Southwest Research Institute. San Antonio.
Texas
SRI International. Menlo Park. California
Syracuse Research Corporation. Syracuse.
New York
Universities Research Association.
Incorporated (National Acceleration Lab),
Argonne, Illinois
Universities Corporation for Atmospheric
Research. Boulder. Colorado
Nonprofit Insurance Companies such as Blue
Cross and Blue Shield Organizations
Other nonprofit organizations as negotiated
with awarding agencies.
imuoe.avawnM7-r-sftta.nl •
SJUMO COW *f tO-S1.«
(Note: This reprint incorporates corrections
published at 46 FR 17185. Tuesday. March 17,
1981.)
- 45 -
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. APPENDIX 5"
SAMPLE" FORM,-CERTIFrICATION: BY AN. AUTHORIZED
NONPROFIT ORGANIZATION OFFICIAL
I hereby certi-f.y; that the? information contained in the indirect
cost-rate proposal for-the fiscal year ended, or ending:
j and which is attached" to, this
(Month/Date/Year)
certification is prepared in conformance with Office of Management and.
Budget Circular A-122.. I-further, certify/: (1) that the same costs that
have been treated as* indirect; costs have' not. been* claimed as direct •
costs., (2). that similar types of costs, have: been, accorded consistent
accounting treatment., ,and_i(3) that the. information provided by the
organization which was used as a. basis for acceptance of the-rate(s) is
not subsequently .found' to be: materially inaccurate.
(Signature)
(Name;)
(Title)
(Name? of,. Organization*)
-1.
- 46 -
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"ff
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DATE DUE
NAR -
APR *
GAVLORD
1 pnn?
5 2003$
u&n*
t*~
ft
PRINTED IN U.S.A.
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