Interim General Budget Development Guidance for Applicants and Recipients of EPA Financial
Assistance
(Last Revised: September 16, 2022)
Contents
Introduction.................................................................................................................................................... 3
Applicability 3
I. Factors to Consider for All Cost Categories 4
A. General Principles for Cost Allowability 4
B. Prior Approval of Costs 5
C. Pre-Award Costs 6
D. Cost Share (a.k.a. Match) 6
E. In-Kind Assistance and Intergovernmental Personnel Act Assignments 7
F. Pre-A ward Budget Revisions 10
G. Program Income (PI) 10
H. Miscellaneous 12
II. Personnel and Fringe Benefits............................................................................................................... 13
A. Personnel 13
B. Fringe Benefits 15
III. Travel 17
A. Trips Covered by Travel Category 17
B. Travel Budget Narrative 17
C. Allowable Travel Costs 18
IV. Equipment............................................................................................................................................. 19
A. Definition of Equipment 19
B. Prior EPA Approval for Equipment Purchases 19
C. Allowability of Equipment Costs 20
D. Procedures for Purchases of Equipment 21
¥. Supplies...................................................................................................................................................21
A. Definition of Supplies 21
B. Supplies Budget Narrative 22
C. Procedures for Purchase of Supplies 22
VI. Contractual........................................................................................................................................... 22
A. General 22
B. Special Contracting Situations 24
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C. Competition Requirements 27
VII. Construction........................................................................................................................................ 30
A. General Error! Bookmark not defined.
B. Eligible Construction Costs Error! Bookmark not defined.
C. Prevailing Wages Error! Bookmark not defined.
VIII. Other................................................................................................................................................... 32
A. General 32
B. Special Considerations for Other Direct Costs 33
C. Rental/Lease 33
D. Participant Support Costs 34
E. Subawards 36
IX. Indirect Co; int Specialists Only).............................................................................................. 39
A. Definitions 39
B. EPA IDC Policies 39
C. Distribution of IDC Charges 41
Appendix 1 - Document Acronyms ............................................................................................................ 42
Appendix 2- Sample Budget Detail/Narrative 43
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Introduction
Proper characterization of costs is important for effective management of
Environmental Protection Agency (EPA) financial assistance (grants and cooperative
agreements) awards. EPA conducts pre-award cost reviews for all assistance
agreements, except those awarded on a fixed amount basis. Correctly characterizing
costs will make the review process more efficient for bothEPA and recipients.
Additionally, properly characterized costs are less likely to be questioned by auditors
since many of the rules for expending EPA funds are predicated on the types of costs
recipients incur. It is important for recipients to consult with their EPA Project
Officers (PO) and Grant Specialists (GS) when considering incurring costs that
seem unusual or arecovered by the regulatory requirements described below.
A list of Acronyms is available in Appendix 1. EPA has provided a sample budget
narrative in Appendix 2.
Note: This interim guidance uses the terms "applicant" or "recipient" to refer to the
non-Federal entity applying for or receiving Federal funds depending on the context.
Applicability
The interim guidance does not supersede requirements contained in regulations, the terms
and conditions of EPA financial assistance agreements, or published EPA policies.
Consistent with 2CFR 200.302(a). it does not require that states alter their internal
accounting systems, create crosswalks, or take actions that are otherwise unnecessary to
comply with the requirements of the regulation. If a state identifies a conflict between the
cost categorization described in the interim guidance and state accounting systems, it should
contact EPA's Grants Management Officer to resolve the matter.
A. Continuing Environmental Program Grants Subject to 40 CFR Part 35, Subparts A and B.
This guidance should be used in conjunction with:
Interim Guidance on Cost Review of Grants/Performance Partnership Grants Awarded
under 40 CFR Part 35 Subpart A
Grants Policy Issuance 13-02: Streamlining Tribal Grants Management (Subpart B
Programs).
The Interim Guidance supplements but does not supersede these Part 35 Subpart A and B
guidances.
B. Clean Water and Drinking Water State Revolving Fund (SRF) Capitalization Grants
subject to 40 CFR Part 35, Subparts K and L.
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This Interim Guidance applies when states use a portion of their SRF capitalization grant for costs
that are different than "pass-through" funds for loans and other forms of subawards. Pass-through
funds are categorized as "Other" and the Intended Use Plan would serve as the back-up
documentation to support these costs. For such awards, a simplified cost review form specific to the
SRF programs would be used. If the capitalization grant application indicates the state is requesting
funding for administrative costs or other activities that are different from pass-through funding, POs
and GSs are to use this Interim Guidance to ensure costs are properly characterized under the cost
categories in the SF-424A and EPA's non-construction budget. For these awards, EPA's project
grant cost review form would be used.
I. Factors to Consider for All Cost Categories
A. General Principles for Cost Allowability
1. For all of the cost categories described below, costs must be allowable under the Uniform
Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards at
2 CFR 200, commonly known as the Uniform Grant Guidance (UGG). and EPA's
implementing regulations at 2 CFR 1500.Note, however, that due to their size and nature
some nonprofit recipients are exempt from the UGG Cost Principles as provided at 2 CFR
200.401(c). Those organizations follow 48 CFR 31.2 and are listed in Appendix VIII of the
UGG.
2. The general standards for determining allowability are described at 2 CFR 200.403. Costs
must be necessary for the performance of the EPA award and not be prohibited by statute, the
2 CFR Part 200 Subpart E Cost Principles, another regulation, program guidance or the terms
of the award. Final decision on cost allowability will be made by an EPA Grants Management
Officer (GMO) or Award Official as appropriate.
a. Eligible: A cost is eligible if it is permitted by statute, program guidance, or
regulations. For example, land acquisition and construction costs are not eligible
training costs as provided at 40 CFR 45.145(b). There may be statutory prohibitions or
limitations on cost eligibility particularly for administrative costs. Some program
offices issue guidance or include terms and conditions that make otherwise allowable
costs ineligible such as prohibiting recipients from incurring participant support costs
(described below) for trainee travel or stipends.
b. Reasonable: A cost is reasonable if it does not exceed that which would be
incurred by a prudent person under the circumstances prevailing at the time the
decision was made to incur the cost. Factors for determining the reasonableness of
costs are set forth at 2 CFR 200.404. For example, costs that are not ordinary for the
performing scope of work for the agreement are not reasonable. Purchasing a van to
transport conference attendees to site visits would not be reasonable while hiring a
bus for that purpose would.
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c. Allocable: A cost is "allocable" to an assistance agreement for the purposes of 2
CFR 200.405 if it benefits the EPA funded project or program and the costs are
distributed in reasonable proportion to the benefits or if it is incurred specifically to
carry out the project or program. Essentially, to be allocable the cost must be incurred
either directly or indirectly to carry out the scope of work. For example, the day to day
costs for the operation of a human resources department would not be allocable to the
agreement as a direct cost but may be included in the recipient's indirect cost rate.
(1) Indirect costs are allocable to assistance agreements when a Federally
approved indirect cost rate (including the 10% de-minimis rate) is properly
distributed to the recipient's base which is typically Modified Total Direct
Costs (MTDC) as defined in 2 CFR 200.1.
(2) Some recipients have multiple sources of funding and must allocate
direct costs among activities in proportion to the benefits derived from the
costs. These costs are allocated separately from indirect costs and should be
included in the appropriate direct cost category.
(a) Examples of direct costs that may be allocated include utilities,
cell phone charges, space rental, general office or laboratory
equipment that are not covered by the recipient's indirect rate.
(b) GSs should inquire whether recipients have adequate systems
in place to properly allocate these types of direct costs and verify
that the recipient's budget reflects the allocations if the recipient
has limited experience with managing federal funds or there are
other indicators of financial management weaknesses (e.g. audit
findings).
d. Allowable: The UGG identifies certain costs that may not be charged to EPA
assistance agreements under any circumstances. Examples include alcoholic beverages
(2 CFR 200.423). interest on borrowed funds (2 CFR 200.449) and lobbying or
litigation (2 CFR 200.450). GSs are primarily responsible for making determinations
regarding unallowable costs based on the UGG following consultation with the PO.
B. Prior Approval of Costs
1. There is a list of items of costs requiring prior EPA approval at 2 CFR 200.407. some of
which are addressed in this Guidance. Prior approval guidance for Advertising and public
relations, Advisory Councils, Entertainment, Fund raising, Meals and light refreshments at
conferences, and Proposal costs are discussed in OGD's Guidance on Selected Items of Cost.
2. When a recipient's scope of work and/or budget narrative adequately describes an item of
cost requiring prior EPA approval, EPA considers the costs approved when the Award Official
signs the agreement unless the terms and conditions of the award provide otherwise.
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3. Other EPA approvals for items of costs may take place post-award by authorized EPA
officials such as Grants Management Officers and Award Officials. Project Officers do not
have authority to provide prior EPA approval for costs specified at 2 CFR 200.407.
C. Pre-Award Costs
1. The allowability of pre-award costs are governed by 2 CFR 200.458 and 2 CFR 1500.9
unless a program specific regulation (e.g. 40 CFR 35.6275(b) for Superfund Cooperative
Agreements or 40 CFR 35.4100 for Technical Assistance Grants) prohibits or restricts the
allowability of pre-award costs.
2. EPA defines pre-award costs as costs incurred prior to the award date, but on or after the
start date of the Budget period and Period ofperformance as defined in 2 CFR 200.1. Under
EPA's interpretation of 2 CFR 200.308(e)( 1) and 2 CFR 1500.9, all eligible costs must be
incurred during the budget/ perfromance period as defined by the start and end date shown on
the grant award to receive EPA approval. This interpretation is implemented in a grant-specific
Term and Condition entitled "Pre-award Costs" which will be included in all awards when the
recipient has incurred EPA approved costs prior to award.
3. The budget/project periods must be consistent with that shown in section 17 of the
Standard Form 424 (SF-424). Recipient Workplan, and EPA Notice of Award.
D. Cost Share (a.k.a. Match)
1. As provided at 2 CFR 200.306(b) costs that a recipient intends to count towards meeting a
cost share requirement must be necessary and reasonable, allowable under the UGG, verifiable
from the recipient's accounting records as well as eligible under the EPA assistance program,
and included in the EPA approved budget.
a. Absent authority provided by a Federal statute, recipients may not use Federal
funds to meet cost share requirement.
b. Recipients must categorize contributions towards cost-shares required by
statute, regulation or the terms of the assistance agreement in the appropriate
budget category. Voluntary cost shares must be reflected in the appropriate
budget category.
2. The recipient must account for in-kind contributions from non-Federal sources (i.e.
personnel, contractual, equipment, supplies, indirect) in the appropriate cost category.
3. Volunteer services (e.g. uncompensated services provided by non-employees of the
organization) may be counted as cost sharing or matching if the service is an integral and
necessary part of an approved project or program. These volunteer contributions towards cost
shares must be included in the "Other" category.
3. Contributions should be valued based on the work the volunteer performs. For example, in a
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situation in which a recipient intends to count time spent by volunteers performing sampling
work towards cost share, the contributions should be valued based on hourly market rates for
employees of sampling firms or government employees performing sampling. The volunteers'
time would not be valued based on what they get paid at their place of employment under this
scenario unless they perform sampling work for the organization that employs them.
4. Recipients may apply costs incurred for facilities, equipment use, and related services (e.g.
audio-visual support for a conference) as cost share when the facilities, equipment and services
are used to perform the EPA award. The same costs must not be charged to any EPA
agreement, a financial assistance agreement with another Federal agency, or included in the
recipient's indirect cost rate to qualify as cost share.
5. Voluntary cost shares offered by recipients for competitive assistance agreements must be
included in the Standard Form (SF) 424A. Budget Information for Non-Construction Programs.
and are binding on the recipient as provided in the definition of Voluntary committed cost
sharing in 2 CFR 200.1.
a. EPA Programs that are willing to accept voluntary cost shares include a notice to
that effect in the competition announcement.
b. Voluntary costs shares are a form of leveraging that may only be met with
eligible and allowable costs.
Note: Competitive recipients may also propose forms of leveraging other than
binding voluntary cost shares. Leveraging may include commitments that are not
necessarily comprised of eligible and allowable costs. For example, an applicant for
a Brownfields cleanup grant may indicate in the application that the cleanup may
leverage a specific amount of funding for construction of affordable housing after
the property has been cleaned up. The leveraged funding for construction of housing
would not qualify as voluntary cost share because costs for constructing housing are
not eligible for funding under the cleanup grant. However, EPA could consider the
potential for leveraging post-cleanup funding for the site as part of the competition
for cleanup funding.
Recipients should not include leveraged funding not intended to be a voluntary cost-
share in the SF- 424A budget as otherwise they will make a binding cost-share
commitment.
E. In-Kind Assistance and Intergovernmental Personnel Act Assignments
1. EPA In-Kind Assistance
a. EPA In-Kind Assistance is federal financial assistance provided in the form of
goods or services in lieu of direct financial assistance agreement (grant and
cooperative agreement) funds. Funds used for EPA In-Kind Assistance are not
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awarded to the recipient of the assistance agreement but are instead used on the
recipient's behalf.
b. In-Kind Assistance that EPA provides is different than in-kind contributions a
recipient obtains from third parties for the purposes of meeting a cost-share or
match requirement.
c. An EPA award, at the Agency's discretion, may include In-Kind Assistance
provided by EPA contracts (including purchases or leases of equipment or
purchases of supplies), EPA-furnished Federally-owned equipment or supplies
under 2 CFR 200.312, Federally-owned and exempt property, or support from
other Federal agencies under Interagency Agreements between EPA and the other
agency. A recipient may request In-Kind Assistance or EPA may decide to include
it in an assistance agreement when In-Kind Assistance is more cost-effective than
providing funds to the recipient.
d. When EPA provides In-Kind Assistance through a contract instead of funds only
authorized EPA personnel may assign tasks to EPA contractors.
e. When EPA allows a recipient to use Federal property as a form of In-Kind
Assistance under 2 CFR 200.312. the Federal government retains ownership of
transferred property.1 Note, however, that in certain circumstances EPA may have
statutory authority (e.g. the Federal Technology Transfer Act, 15 U.S.C. 3710 (i),
and the Federal Grant and Cooperative Agreement Act 31 U.S.C. 6306) to transfer
equipment used for scientific research to nonprofit research institutions at the end of
the period of performance for basic or applied research agreements.
f. EPA In-Kind funds are included in the SF-424A, Budget Information for Non-
Construction Programs in the "Other" category, and are subject to cost share
requirements, but are not included in the amount of funding made available to the
recipient in the EPA award. The funds are retained within the EPA office and
obligated when the transaction providing the goods or services purchased on behalf
of the recipient takes place.
g. All anticipated In-Kind Assistance amounts are included in the "EPA In-Kind
Amount" in the award budget.
2. Intergovernmental Personnel Act Assignments (IPA)
a. Although similar to In-Kind Assistance, IPA assignments of EPA employee to work
with recipients and funded with EPA financial assistance are not categorized as In-
1 Transfers of surplus Federal property that will be owned by non-Federal entities generally takes place outside of assistance agreements
under General Services Administration surplus property procedures.
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Kind Assistance. Funds for IP As are always included with the award. It is the
recipient's responsibility to drawdown grant funds and pay bills sent by EPA for the
IPA assignment (see item g below).
b. For the purposes of the financial assistance agreement and governing regulations,
the funding for the EPA employee's IPA assignment are considered Participant
support costs under 2 CFR 200.1. 2 CFR 200.46. and EPA's Guidance on
Participant Support Costs. Recipients who have agreed to use EPA financial
assistance funds to finance an IPA assignment for an EPA employee are to include
the sum of the estimated costs for IPA compensation, travel and relocation in the
"Other" budget category on the SF-424A, Budget Information for Non-
Construction Programs.
c. The budget narrative for the agreement is to include line items for each type of cost
of the IPA assignment. As with all IPA assignments, the division of costs for the
assignment is subject to negotiation between EPA and the recipient for financial
assistance. The EPA financial assistance agreement may bear all or part of the cost
for the IPA assignment. If applicable, the IPA may be allocated across more than
one assistance agreement if the duties call for the assignee to support multiple
programs. In such instances there must be an appropriate allocation methodology
developed by the recipient (in consultation with the Project Officer(s) and Grant
Specialist(s)) and approved by the Award Official or Grants Management Officer.
d. If the IPA assignee is identified at time of award, the EPA employee who will be on
the IPA assignment funded by the financial assistance agreement will work with the
Project Officer and Grant Specialist to ensure that the recipient has accurate
information on the employee's rate of compensation, travel entitlements, and
relocation costs (if any).
e. As provided in 2 CFR 200.456, Participant Support Costs, IPA assignments funded
with financial assistance that are established after the award of the agreement
require prior EPA approval for the participant support costs. A budget modification
and amendment to the agreement will be necessary.
f. When grant or cooperative agreement funds are used to fully or partially finance an
IPA assignment, the estimated funding for the IPA assignment (e.g. personnel
compensation, travel, relocation costs) is made available to the recipient at time of
award. The recipient draws down funds to pay bills for the cost of the IPA
assignment sent by EPA's Finance Center. The timing of the drawdowns for
recipients other than states is subject to the General Term and Condition "Proper
Payment Drawdown. State drawdowns are governed by 2 CFR 200.305(a).
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F. Pre-Award Budget Revisions
1. In situations in which changes to a recipient's budget are necessary due to mis-
categorization or otherwise, EPA's Project Officers and Grant Specialists will work with
the recipient to document revisions to budgets.
2. The recipient will submit a revised version of the SF-424A. budget narrative and other
budget related documents that are consistent with the Approved Budget in the Award
Document. Note that for state and tribal continuing environmental program grants covered
by Grants Policy Issuance (GPI) 12-06 and GPI13-02 "pen and ink" changes to recipient
budgets are acceptable.
G. Program Income (PI)
1. Federal policy encourages recipients to earn income to defray program costs. 2 CFR
200.307(a). Recipients must properly recognize, account for, and expend PI to maximize
funding available for environmental protection. Recipients should work with their Project
Officer to clearly describe how PI will be generated and expended in the budget narrative.
Recipients must include an estimate of PI in line 7 of the SF-424A budget.
2. Program Income is defined at 2 CFR 200.1 as gross income directly generated by the EPA
supported activity or earned as a result of the EPA award during the period of performance.
Examples of PI include fees for services (e.g. conference or training registration fees), sales of
products produced with EPA funds, and payments and interest on loans the recipient makes
with EPA funds. Under 2 CFR 200.305(b)(5) and 2 CFR 200.343(d) recipients must disburse
PI before requesting additional EPA funds and refund PI accrued at the end of the agreement
unless an EPA regulation (e.g. 2 CFR 1500.8 for revolving loan fund assistance agreements)
provides otherwise.
a. PI does not include refunds, rebates and similar transactions in which the
recipient recoups previously expended EPA funds. Disposition of refunds, rebates
etc. is governed by 2 CFR 200.305(b)(5). 2 CFR 200.406. and 2 CFR
200.345(aY2Y
b. Proceeds from the sale of real property, equipment and supplies purchased with EPA
funds is not PI. 2 CFR 200.307(d). The property regulations at 2 CFR 200.311 (real
property). 200.313 (equipment) and 2 CFR 200.314 (supplies) provide guidance on the
disposition of proceeds from the sale of these items.
c. As provided at 2 CFR 200.307(c) governmental revenues (e.g. fines, special
assessments) are not PI. It is EPA policy to treat permit fees generated by state, tribal
or local environmental programs as governmental revenues rather than PI per 2 CFR
1500.8.
d. There may be program income implications when a recipient of EPA funds
charges membership fees for exclusive services that are provided using EPA award
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funds or matching funds and the organization receives more than 50% of its annual
revenue from EPA assistance agreements. Recipients should work with their
Project Officer to determine if all or part of the membership fees the recipient
charges are PI.
3. Rules governing PI are set forth at 2 CFR 200.307 and 2 CFR 1500.8.
a. As authorized by 2 CFR 200.307(b) and 2 CFR 1500.8(b). unless the terms of the
agreement provide otherwise recipients may deduct costs incidental to generating PI
from gross income to determine net PI if the costs have not also been charged to the
EPA award. Additionally, in situations in which EPA is only partially funding the
activity generating PI an appropriate adjustment must be made to ensure that the
amount of funds designated PI fairly reflects EPA's contribution to the revenue
generating activity. For example, if EPA is funding 50% of the cost of a conference
only 50% of the registration fees would be considered PI.
b. There are three potential dispositions of PI; deduction, addition, and cost
sharing.
(1) The deduction method requires the recipient to deduct PI from total
allowable costs to determine net allowable costs. 2 CFR 200.307(e)(1). EPA
policy, as reflected at 2 CFR 1500.8 disfavors the use of the deduction
method.
(2) The addition method allows recipients to add PI to the EPA funding and use
it under the terms and conditions of the EPA award including regulations
governing the allowability of costs. 2 CFR 200.307(e)(2). For example, a
recipient could not use PI generated by conference registration fees to purchase
alcohol for a reception as that practice would violate 2 CFR 200.423. EPA's
general policy as provided at 2 CFR 1500.8 is that addition is the default use of
PI unless the terms and conditions of the award provide otherwise.
(3) With prior EPA approval, recipients may use PI to meet cost sharing
requirements as provided at 2 CFR 200.307(e)(3). General guidance on cost
share is provided in Section I. E. above.
4. Program income when used for cost share can be complicated.
a. The amount of program income, if any, that is expected to be used to for cost share
must be included in Column (f) "Non-Federal" of Section A "Budget Summary"
table on the SF-424A and distributed among the cost categories. The total amount of
PI that the recipient expects to generate for both cost share and addition, if applicable
must be included in Line 7 of Section B "Budget Categories". If program income is
not going to be used for cost sharing, the PI should only be included in Line 7.
b. In instances where program income is being used for cost sharing and the recipient
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fails to generate sufficient program income to meet its cost share requirement, it will
either have to make up for the shortfall with other non-Federal funds or it will be
limited to the proportional amount of federal funds that are commensurate with the
level of program income generated.
c. There are no federal requirements on the use of PI earned after an award period ends
unless an EPA regulation or the terms of the agreement provide otherwise. Under 2
CFR 200.307(f) and 2 CFR 1500.8 EPA may negotiate close out agreements to govern
the use of accrued and future PI.
H. Miscellaneous
1. Depending on state, tribal or local law, transfers of funding between departments or
agencies of the same unit of government may be Interagency Service Agreements for
distribution of direct costs, subawards, or procurement contracts. Budgets describing these
types of transactions will take various forms but must clearly assign costs to appropriate
categories.
a. Under 2 CFR 200.302(a) states expend and account for the Federal award in
accordance with state laws and procedures for expending and accounting for the
state's own funds.
b. EPA staff will work closely with the governmental recipient to develop accurate
information on how EPA funds will be transferred and expenditures characterized for
budget purposes. It is possible that the indirect cost rates for departments or agencies
within the same unit of government will be different For example, recipients may
either provide separate budgets (encompassing both direct and indirect costs) for each
department's share of the EPA award or characterize the transactions as subawards
with allowable indirect costs.
(1) If the governmental recipient provides separate budgets for each
department, the EPA award document should include separate budget
worksheets for each department receiving EPA funds. However, these
budgets may be consolidated into a single budget table at time of award
depending on the practice of the EPA awarding office.
(2) If the governmental recipient characterizes the funding transfers among
departments as subawards, a line item amount would be included in the budget
narrative for the "Other" cost category. The recipient must comply with the
requirements for pass-through entities at 2 CFR 200.332 if the transfer will be
in the form of a subaward.
(3) If under state law transactions between agencies is classified as a
procurement contract, then the costs may be classified as contractual.
Transactions between agencies or departments of other units of government
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may also be classified as contractual depending on the nature of the transaction
and state, tribal or local government law.
b. Additional information on Interagency Transfers between departments of the
same unit of government is available in OGD's Frequent Questions on the Sub award
Policy.
2. Transfers of funds between departments of the same Institutions of Higher Education (IHE)
are governed by the IHE's internal policies and procedures and EPA does not consider these
transactions subawards or procurement contracts for the purposes of the UGG. However,
some IHE's with multiple campuses with independent authority to receive Federal funds (e.g.
different unique entity identifiers, different employer identification numbers) may use
subawards to transfer funds between IHE campuses depending on the IHE's financial
management procedures. Any subawards between campuses are subject to the subrecipient
managment requirements of 2 CFR 200.332 and EPA's Subaward Policy and implementing
terms and conditions.
II. Personnel and Fringe Benefits
A. Personnel
1. This category includes only direct costs for the salaries, wages, and allowable incentive
compensation for those individuals who are employees of the recipient organization who will
perform work directly for the project. Employees receive W-2 forms for Federal tax
purposes. Note that under 2 CFR 200.444 there are substantial restrictions on the allowability
of direct costs for salaries of Governors, Chief Executives of tribal and local governments,
and legislators.
a. Consultant costs for individuals who are not employees of the recipient are classified
as contractual rather than personnel. Individual consultants typically receive 1099
forms for Federal tax purposes.
b. Compensation for program participants (e.g. stipends or other allowances) such as
interns and fellows (other than individual fellowships under 40 CFR Part 46) who
are not employees of the recipient organization are participant support costs as
provided in must be classified as "Other". Additional information is available in
EPA Guidance on Participant Support Costs.
c. Costs for employees of subrecipients are included in the "Other" budget
category in the line item for subawards.
2. If no personnel costs are identified in the budget, the recipient remains responsible for
reporting, overseeing any contracts (including consultant contracts), or subawards entered
into under the assistance agreement and for managing any equipment and supplies which are
acquired or leased. EPA staff may ask recipients for a written explanation of how the award
will be managed in the absence of charges for personnel costs.
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3. The recipient's budget detail should identify the personnel category type by Full Time
Equivalent (FTE), including percentage of FTE for part-time employees, number of
personnel proposed for each category, and the estimated funding amounts.2
a. For example, 4 engineers @ $125,000, 2 scientists @ $75,000, 1 manager @
$200,000, etc. The personnel budget should also indicate the percentage of time each
employee will devote to the EPA funded project (e.g. 25% of the time for 1 engineer at
$125,000 per year would be budgeted at $31,250 for each year).
b. Note that recipients may also depict their personnel costs based on hourly rates and
numbers of anticipated hours that will be charged to the assistance agreement.
c. EPA staff may review the personnel budget to determine whether the recipient's
proposed staffing is appropriate and adequate for the project. Any estimated time
durations should be consistent with the project and budget periods.
4. EPA's Grant Specialist may verify that the amounts for personnel and fringe benefits
specified in the budget narrative agree with the amounts specified in the applicable budget
category in the SF-424A.
a. To be allowable as assistance agreement costs, compensation for recipient
employees must be reasonable as required by 2 CFR 200.430. EPA staff may ask
recipients questions regarding whether salaries and wages are excessive particularly
when an EPA assistance agreement will bear 100% of the costs for an individual's
compensation.
b. EPA staff may ask the recipient to provide documentation that the compensation
rates are based on a written personnel policy that is applied consistently to Federal and
non-Federal activities.
(1) As provided in 2 CFR 200.430(b). recipient employees must not receive
compensation for activities charged to EPA assistance agreements that are
higher than what the recipient pays the employees for similar activities that
are not Federally funded.
(2) Based on Department of Labor salary data at
http://www.bls.gov/bls/blswage.htm or other sources of information, EPA
staff may ask the recipient to justify the proposed rates with market
analyses.
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The term "FTE" refers to one employee working full time for a year. For employees working a 40-hour workweek, one
FTE typically equals 2087 (<-should we change this to 2087 to be consistent with OPM?) hours.
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B. Fringe Benefits
1. Fringe benefits are allowances and services provided by employers to their employees as
compensation in addition to regular salaries and wages. Recipients may only charge EPA
assistance agreements for fringe benefit costs for personnel whose compensation is also
charged to the EPA assistance agreement. Fringe benefit charges must be based on actual
hours worked on the EPA funded project.
a. Fringe benefit costs are allowable to the extent that the benefits are reasonable and
are required by law, governmental unit employee agreement, or an established
policy of the recipient consistently applied to activities that are federally funded
and those that are not. Additional guidance on the allowability of fringe benefit
costs is provided in 2 CFR 200.431.
b. Fringe benefits include, but are not limited to, the cost of leave, employee
insurance, pensions and unemployment, cell phone allowances, holiday bonuses,
and similar benefits.
2. The budget narrative (or similar document explaining the composition of the budget) should
identify the recipient's fringe benefit rate. Fringe benefits may be expressed in terms of a
percentage of salaries but must be allocable to the agreement based on the amount of time
the employee devotes to work that benefits the EPA assisted project.
a. The GS must ensure that the recipient breaks fringe benefits out separately during
budget reviews. When the recipient has combined the fringe benefit costs with
direct salaries and wages in the personnel category, the GS must request the
recipient to provide a breakout of the fringe benefit costs.
b. In instances where the recipient does not specify a percentage or amount for fringe
benefits, EPA staff may verify that the recipient does not intend to charge any
fringe benefit costs to the agreement.
3. If the recipient does not have a fringe benefit rate but intends to charge the EPA agreement
for fringe benefits, the recipient should provide an estimate based most recent actual fringe
benefit costs. The budget detail narrative should provide an explanation of the basis for the
estimate and show the calculations.
a. The actual fringe benefit costs must be allocable to the agreement based on the
amount of time the employee devotes to work that benefits the EPA assisted
project.
b. Unless the employee is working 100% of his or her time on the EPA funded
project, the actual fringe benefit costs must be allocated to the EPA agreement in a
manner that takes into account other activities the employee performs that must
bear a proportional share of the fringe benefit costs.
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4. When reviewing the budget, EPA staff will pay particular attention to fringe benefit rates
that seem unusually high based on information from other similarly situated recipients. The
Bureau of Labor Statistics website publishes average rates that can be used as a reference.
The chart below is taken from the Employer Costs for Employee Compensation news for
December 2020. Note all benefit rates across the various worker categories, including leave,
are under 40%.
lable 1. fcmployer Costs tor tmptoyee Compensation by ownership
[Dec. 202u]
The composition of fringe benefits may only include allowable costs under 2 CFR 200.431 and must
be properly allocable to the EPA funded program or project. For example, costs for providing an
automobile to an executive are unallowable to the extent that the costs include home to work
transportation and other personal uses as provided by 2 CFR 200.431(f).
a. If not otherwise available in the budget narrative, EPA staff may request that
recipients identify the types of fringe benefits that are included in the fringe
benefit rate.
b. If leave is included in the fringe benefit rate or the recipient must have a system for
properly allocating leave costs to the EPA assistance agreement.
(1)In the absence of a rate that covers leave costs the recipient should explain
how it intends to charge the costs of leave to the agreement, especially for
staff that work less than full-time on any one agreement. The recipient must
equitably distribute leave across all cost centers over the course of the full
year.
(2) For example, if the recipient's leave policy provides that employees accrue 8
hours of leave for each 40-hour pay period then the EPA assistance agreement
should only bear the costs of leave in proportion to the employees work on the
agreement. The recipient may charge the agreement for 100% of the leave only
for employees who work full-time on that agreement. The recipient must
allocate leave charges for employees who do not work full-time on the
agreement under a formula that takes into account the extent to which the
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employee performs work on the agreement.
III. Travel
A. Trips Covered by Travel Category
1. As provided under 2 CFR 200.475. costs classified as "travel" must be for recipient
employees for trips that are necessary to perform the EPA agreement. Travel must be
integral to the purpose of the proposed project (e.g., inspections) or related to proposed
project activities (e.g., attendance at meetings or training courses).
2. Travel for trainees and other program participants such as interns, fellows, and work
group members who are not employees of the recipient are Participant Support Costs under 2
CFR 200.1 and 200.456 and should be included in the "Other" budget category.
3. Travel costs include payment or reimbursement of recipient employees' costs for
common carrier transportation fares, lodging, per diem (subsistence), rental vehicles, taxes,
internet access charges, phone calls and similar personal expenses allowed under the
recipients travel policies that apply to federal and non-federally funded activities.
4. Costs for transportation services (e.g. a bus and driver) for local or long-distance travel are
classified as contractual.
5. Costs for renting vans for local transportation (i.e. the employee renting the van is not in
travel status) without the services of a driver should be classified as "Other".
B. Travel Budget Narrative
1. Recipients must provide a narrative description of the types/purposes of travel, estimated
number of trips, planned destinations, estimated number of travelers, and estimated per trip
costs for travel to training, meetings and conferences, if known. Note: Ongoing routine
travel for site visits/inspections and similar activities as well as local travel may be combined
into a single amount.
2. The amount and type of travel the recipient proposes must be necessary to effectively
carry out the project. When the recipient has not identified all trips that EPA will fund
(with the exception of ongoing routine travel) the EPA assistance agreement may include a
term and condition requiring the recipient to notify the EPA Project Officer of proposed
domestic travel. See Item III B. 5 for guidance on international travel.
3. Travel for executives (e.g. Governors, Mayors, elected Tribal Leaders) and legislators
(including Tribal Council members) is allowable with prior approval by the Award Official
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or Grant Management Officer if the travel is specifically related to performing an EPA
funded project or program.
4. Under 2 CFR 200.475 travel by Trustees, Directors and similar officials with nonprofits or
Institutions of Higher Education is allowable as a direct cost only if the travel costs are
allocable to an EPA award and not included in the recipient's indirect cost pool.
5. If the recipient proposes international travel the EPA Project Officer will obtain and
document the proper approvals from the EPA Office of International and Tribal Affairs
(PIT AY
a. International travel includes trips to Mexico and Canada but does not include trips
to Puerto Rico, the U.S. Territories or possessions.3 Recipients that routinely travel
to Mexico and Canada by motor vehicle (e.g. for sampling or meetings) may
describe their travel in general terms in the application. OITA may then approve
the travel generally as opposed to the recipient obtaining OITA approval on a trip-
by-trip.
b. If OITA has not provided approval at time of award the EPA assistance agreement
will include a grant specific term and condition precluding the use of EPA funds
for international travel until the requisite approval is provided.
c. If the recipient has not identified all trips EPA will fund at time of award or
indicates that there will be no international travel by employees, EPA's
General Terms and Conditions require the recipient to obtain EPA approval for
international travel.
C. Allowable Travel Costs
1. Under 2 CFR 200.475(d) allowable travel costs may not exceed the rates and amounts for
Federal travel unless the recipient's cognizant Federal audit agency (or EPA if requested by
the recipient to do so) has accepted a travel policy that provides differently. Federal lodging
and per diem rates are available at http://www.gsa.gov/portal/content/104877.
2. The costs of first class and business class transportation are generally not allowable unless
the requirements at 2 CFR 200.475(e) are met. If the application indicates that the recipient
anticipates using EPA funds for first or business class travel, EPA staff will verify that
regulatory requirements are met.
U.S. territories are islands under the jurisdiction of the United States which are not States of the United States. U.S.
possessions can be divided into two groups:
1. Those that have their own governments and their own tax systems (Puerto Rico, U.S. Virgin Islands, Guam,
American Samoa, and The Commonwealth of the Northern Mariana Islands), and
2. Those that do not have their own governments and their own tax systems (Midway Island, Wake Island,
Palmyra Island, Howland Island, Johnston Island, Baker Island, Kingman Reef, Jarvis Island, and other
U.S. islands, cays, and reefs that are not part of any of the fifty states).
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IV. Equipment
A. Definition of Equipment
1. Equipment is defined in 2 CFR 200.1 as tangible, non-expendable, personal property
having a useful life of more than one year and an acquisition cost of $5,000 or more per
unit. Recipients may establish a lower dollar threshold or different definition of equipment
through their own written property management policies as long as the thresholds and
definitions are consistent with the definitions of Equipment and Supplies in 2 CFR 200.1.
The recipient's lower threshold or different definition is binding.
2. This category includes only equipment the recipient proposes to purchase as a direct
cost. Costs for equipment rentals are classified as "Other" as indicated in Section VIII C.
3. Equipment also includes accessories and services included with the purchase price
necessary for the equipment to be operational. It does not include separate equipment
service or maintenance contracts (not included in the purchase price) which should be in the
contractual category.
4. When a recipient intends to purchase a base component that costs less than $5,000 (or the
recipient's equipment price threshold) and related modifications, attachments, accessories, or
auxiliary apparatus are necessary to make the asset usable for the purpose for which it will be
acquired, the cost of all components is cumulative in determining whether it is considered
equipment. If the net invoice price of all related items equals or exceeds $5,000 or the
recipient's equipment price threshold, EPA considers the asset to be equipment rather than
supplies based on the definition of Acquisition cost at 2 CFR 200.1.
5. The combined costs should be categorized as equipment for budgeting, inventory and
disposition purposes. These determinations require case by case judgments based on the
intended use of the equipment and whether the attachments, accessories, or auxiliary
apparatus are components of the asset rather than intended as stand-alone devices. The
timing of the purchases is also important.
Note that the definition of Acquisition cost provides that "[AJncillary charges, such as taxes,
duty, protective in transit insurance, freight, and installation may be included in or excluded
from the acquisition cost in accordance with the non-Federal entity's regular accounting
practices."
B. Prior EPA Approval for Equipment Purchases
1. Pursuant to 2 CFR 200.439(b)(2), recipients must have prior EPA approval for
equipment purchases.
2. The recipient's budget narrative should include an itemized listing of all equipment
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proposed under the agreement and that the equipment is necessary for the project.
Recipients should not specify brands of equipment, unless applicable procurement
procedures have been followed to identify the most cost-effective brand, but must describe
the type of equipment they intend to purchase with EPA funds. Budget narratives that
identify a brand name for the equipment should include a description of the procurement
procedures followed to select the brand of equipment. Note that under 2 CFR 200.319(b)(6)
specifications that identify specific brands of equipment must also allow vendors to offer
equipment that is "equal" to the specified brand in terms of performance or other relevant
requirements.
3. If the recipient cannot provide an itemized equipment list at time of award, then EPA will
include a grant-specific programmatic term and condition requiring post-award approval of
equipment purchases by EPA's Award Official or Grants Management Officer. The budget
must be revised if necessary based on the final itemized list of equipment.
4. If the recipient's itemized list of equipment identifies unit costs of less than $5,000, the
recipient should explain whether its property management policies stipulate such a lower
threshold for equipment unless the recipient has previously provided its equipment purchase
policies to EPA's Project Officer otherwise provided an explanation in the budget detail
narrative.
5. OITA approval is not required for purchases of equipment manufactured in foreign
countries. However, as provided by 2 CFR 200.322(a). the recipient:
. . . should, to the greatest extent practicable under a Federal award, provide a
preference for the purchase, acquisition, or use of goods, products, or materials
produced in the United States (including but not limited to iron, aluminum, steel,
cement, and other manufactured products). The requirements of this section must be
included in all subawards including all contracts and purchase orders for work or
products under this award.
Definitions for the terms "Produced in the United States" and "Manufactured products"
are available at 2 CFR 200.322(b). Some EPA programs may be subject to other Buy
American requirements as described in program regulations or EPA guidance.
C. Allowability of Equipment Costs
1. Recipients should provide detailed explanations for proposed purchases of certain items
such as automobiles and scientific devices that have useful lives beyond the project
period. An example of a situation in which there may be an ongoing need for equipment
after the project period ends is an EPA Continuing Environmental Program grant that
provides support for the recipient's inspection program on an ongoing basis.
2. Short-term rental of such equipment may be more economical depending on the nature of the
project and the extent of EPA's funding relationship with the recipient. For example, if the
recipient will use purchased equipment on other Federally funded projects then purchasing
the equipment may be appropriate provided the costs of the equipment are properly allocated
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among the cost centers for the project. Equipment rental costs are classified as "Other" as
provided in section VIII C .
3. Contingency reserves for equipment associated with a major information technology
infrastructure project or similar activities are allowable to the extent permitted by 2 CFR
200.433 and should be included as a separate line item in the Equipment category.
D. Procedures for Purchases of Equipment
The recipient should describe or reference the procedures it will use to acquire the equipment
in the budget narrative or other component of the proposed work plan. Information regarding
competition requirements for purchasing equipment is available in the Section VI C. of the
Contractual Category of this Cost Review Guidance and EPA's Best Practice Guide for
Procuring Services. Supplies, and Equipment Under EPA Assistance Agreements.
V. Supplies
A. Definition of Supplies
1. As provided in 2 CFR 200.1. Supplies are tangible personal property other than
equipment with a per item acquisition cost of less than $5,000 as provided at unless the
recipient's written property management systems establish a lower threshold.
2. Electronic devices including laptops, personal computers, tablets, and cell phones with a
per item acquisition cost of less than $5,000 may be classified as supplies unless the
recipient's written property management systems policies classify these items differently.
Recipients may define such items as equipment to ensure they are tracked in their inventory
systems.
3. When a recipient intends to purchase a base component that costs less than $5,000 (or the
recipient's equipment price threshold) and:
a. related modifications, attachments, accessories, or auxiliary apparatus are necessary
to make the asset usable for the purpose for which it will be acquired, and;
b. the net invoice price of all related items equals or exceeds $5,000 or the
recipient's equipment price threshold, then;
EPA considers the asset to be equipment rather than supplies based on the definition of
Acquisition cost at 2 CFR 200.1. The combined costs must be categorized as equipment
for budgeting, inventory and disposition purposes. These determinations require case-
by-case judgments based on the intended use of the equipment and whether the
attachments, accessories, or auxiliary apparatus are components of the asset rather than
intended as stand-alone devices. The timing of the purchases is also important.
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Note that the definition of Acquisition cost provides that "[AJncillary charges, such
as taxes, duty, protective in transit insurance, freight, and installation may be
included in or excluded from the acquisition cost in accordance with the non-Federal
entity's regular accounting practices."
B. Supplies Budget Narrative
1. The recipient should briefly explain in budget narrative why the supplies the recipient
proposes to purchase are necessary for the project.
2. Costs should be categorized by major supply categories (e.g. office supplies, computing
devices, monitoring equipment) and include the estimated costs by category.
3. Any single item valued at $5,000 or more in this category should be moved to the
"Equipment" category. Services associated with supplies, such as rental costs for
computing devices, should be included in the "Other" category.
C. Procedures for Purchase of Supplies
1. The recipient should describe the procedures it will use to acquire supplies in the budget
narrative unless the recipient has previously provided EPA's Grant Specialist with a
description of its procurement system.
2. Information regarding competition requirements for purchasing supplies is available in the
Contractual Category of this Cost Review Guidance.
3. Note that in many cases recipients will be able to purchase supplies without
competition under 2 CFR 200.320(a)(1) micro-purchase procedures.
a. The current threshold for micro-purchases is $10,000 per item although this
amount is subject to periodic adjustment for inflation.4
b. Some recipients have higher micro-purchase thresholds as provided in 2 CFR
200.320(a)(1).
c. Additional information regarding micro-purchase procedures and adjustments to the
threshold is available in Section VI. C. 2. b. below.
VI. Contractual
A. General
4 The Office of Management and Budget raised the threshold for micro-purchases from $3,500 to $10,000 on June20, 2018
as provided in the National Defense Authorization Acts for Fiscal Years 2017 and 2018. EPA implemented this direction in
RAIN-2018-G04-R.
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1. Recipients use procurement contracts to acquire property (including intellectual
property such software licenses) and services needed to carry out the EPA funded
project or program. EPA's Best Practice Guide for Procuring Services. Supplies, and
Equipment Under EPA Assistance Agreements provides detailed information on EPA's
interpretation of the procurement requirements in 2 CFR Part 200 (2 CFR 200.317 thru
200.327). Note that as provided in 2 CFR 200.317 states, with limited exceptions
(described below), follow the same procurement statutes, policies, and procedures for
Federal financial assistance funds as they do for state funds.
2. Some EPA program specific regulations establish unique contracting requirements. These
regulations include those for Superfund Technical Assistance Grants (TAG) (40 CFR Part
35. Subpart M) and Superfund Cooperative Agreements (40 CFR Part 35. Subpart O).
a. TAG recipients should consult with the provisions in 40 CFR Part 35, Subpart M on
"Procuring a Technical Advisor or Other Contractor With TAG Funds"
b. For Superfund Cooperative Agreements, recipients should consult with the provisions
in 40 CFR Part 35, Subpart O on "Procurement Requirements Under a Cooperative
Agreement".
3. Contractual services (including those provided by consultants) are those services to be
carried out by an individual or organization, other than the recipient, that establish a
contractual relationship as described at 2 CFR 200.331(b) and Appendix A of EPA's
Subaward Policy.
4. Transactions between recipients and for-profit firms or individual consultants are in
almost all cases procurement contracts subj ect to the procurement requirements in 2
CFR Part 200 competition requirements rather than subawards which generally may be
awarded without competition.
5. Speaker fees (including "honoraria" and travel expenses for non-employees), stand-alone
contracts for audio-visual services and costs for hiring transportation services (vehicles
and drivers) at conferences, meetings, workshops and similar events should be classified
as contractual. Facility rental costs are classified as "Other" and may include audio-visual
and catering services. Personal vehicle rental costs for employees in travel status are
typically considered travel expenses. Costs for rental vehicles for program participants
receiving travel assistance are classified as "Other".
6. Recipients should briefly explain in their work plan and budget narrative why contracting
is appropriate for the project.
a. The recipient should list the proposed contract activities along with a brief
description of the scope of work or services to be provided, proposed duration, and
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proposed procurement method (competitive or non-competitive) in its budget
narrative.
b. EPA does not require recipients to identify contractors (including consultants) in the
work plan but recipients may do so if they describe the procurement process that was
used to select the contractor. Refer to the Sole Source Guidance in Subsection C. 3.
below for additional information. Recipients should also consult EPA's Sub award
Policy Frequent Questions for additional information on EPA's policies for contracting
by recipients.
c. Recipients should work with their Project Officer to obtain OITA approval for
service contracts that will be performed in a foreign country. The term "foreign
countries" includes Mexico and Canada but does not include Puerto Rico, the U.S.
Territories or possessions.
7. Contingency reserves for contracting associated with a major information technology
infrastructure project or similar activity are allowable to the extent permitted by 2 CFR
200.433 and should be included as a separate line item in the Contractual category.
B. Special Contracting Situations
1. If the recipient indicates that it will hire individual consultants, the costs for consultant
compensation that are charged to the EPA assistance agreement (including cost shares) must
not exceed the consultant cap (Level IV of the Executive Schedule) as described at 2 CFR
1500.10 and the Consultant Cap General Term and Condition. EPA may not reimburse
recipients for compensation they pay to individual consultants on an hourly, daily or other
basis that has the effect of exceeding the amount paid to Federal employees at Level IV of the
Executive Schedule. The cap on compensation for individual consultants is statutory, applies to
all recipients including states, and may not be waived by EPA.
a. As provided in 2 CFR 1500.10. the consultant cap applies to ". . . consultation
services of designated individuals with specialized skills who are paid at a daily or
hourly rate."
b. If a consultant is paid on an hourly basis, EPA will not participate in more than the
hourly equivalent of the rate or participate in more than the maximum daily rate if a
consultant paid on an hourly basis works more than 8 hours in a day. There is no
maximum number of days for the purposes of the consultant fee cap. However, if a
consultant works less than 8 hours in a day, EPA will not participate in more than the
hourly equivalent rate for each hour worked even if the consultant is paid on a daily
basis.
Information on how to calculate the maximum daily rate and the daily pay limitation is
available at the Office Of Personnel Management's Fact Sheet: How to Compute Rates
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of Pay and Fact Sheet: Expert and Consultant Pay. Specifically, to determine the
maximum daily rate, follow these steps:
• Divide the Level IV salary by 2087 to determine the hourly rate. Rates must be
rounded to the nearest cent, counting one-half cent and over as the next higher
cent (e.g., round $18,845 to $18.85).
• Multiply the hourly rate by 8 hours. The product is the maximum daily rate.
c. The consultant fee cap only covers personal compensation. Reimbursements
recipients pay to consultants for overhead and travel costs are not subject to the
consultant fee cap.
d. The consultant fee cap is subject to revision annually when Office of Personnel
Management (OPM) changes the compensation for Level IV of the Executive
Schedule.
e. Contracts or subcontracts with multi-employee firms for services are not affected
by the consultant compensation limitation in 2 CFR 1500.10 provided the contractor or
subcontractor rather than the recipient selects, directs and controls individual
employees providing consulting services. Note that contracts with individual
consultants or consulting firms are subject to the competitive procurement requirements
in 2 CFR Part 200.
f. The consultant compensation limitation does not apply to fixed priced contracts
such as those structured as lump sum payments for completion of a study or design of a
training course. Also, the consultant fee cap does not apply to contracts for technical
advisory services awarded competitively under EPA's Superfund Technical Assistance
Grant (TAG) program regulations at 40 CFR 35.4205 provided that the terms of the
contract indicate that the technical advisor has the discretion of an independent
contractor and do not vest the TAG recipient with responsibility for the direction and
control of the technical advisor.
g. The determinations on when the consultant fee cap applies are fact-specific, and
the recipient should consult with EPA's Grant Specialist if there are any questions.
2. As provided at 2 CFR 200.432. costs for meals and light refreshments for conferences are
allowable under certain circumstances with prior EPA approval.. The regulation defines
conference "... as a meeting, retreat, seminar, symposium, workshop or event whose primary
purpose is the dissemination of technical information beyond the [recipient] and is necessary
and reasonable for successful performance . . ." of the EPA funded project.
a. Meals and light refreshments procured from caterers (separate from facility
rental charges) should be classified as contractual.
b. If not explicitly described in their approved scope of work, recipients (other than
certain state recipients of Continuing Environmental Program (CEP) assistance
agreements) must obtain prior approval from EPA's Grants Management Officer for
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meals and light refreshments post-award in accordance with the terms and conditions of
the EPA agreement. In general, meals should only be allowable during conferences
when the work continues during the meals.
(1) Recipients may address questions about whether costs for light
refreshments, and meals for events are allowable to the EPA PO.
(2) The Agency Award Official or GMO will make final determinations on
allowability.
c. Costs for light refreshments and meals for recipient staff meetings and similar
day-to-day activities are not allowable under EPA assistance agreements.
d. There are substantial restrictions on the use of EPA funds for receptions and similar
after-hours events. EPA funding for meals, light refreshments, and space rental may not
be used for any portion of an event where alcohol is served, purchased, or otherwise
available as part of the event or meeting, even if EPA funds are not used to purchase
the alcohol.
e. Refer to EPA's Guidance on Selected Items of Cost for additional information
on the allowability of costs for meals and light refreshments.
f. For state CEP recipients, EPA has waived the prior approval requirement for
meals and light refreshments if the state maintains systems capable of complying
with federal grant regulations at 2 CFR 200.432 and 200.438. EPA's General
Terms and Conditions provide that the state may follow its own procedures for
approving meals and light refreshments without requesting prior approval from
EPA. However, notwithstanding state policies, EPA funds may not be used for (1)
evening receptions, or (2) other evening events (with the exception of working
meetings). Examples of working meetings include those evening events in which
small groups discuss technical subjects on the basis of a structured agenda or there
are presentations being conducted by experts. EPA funds for meals, light
refreshments, and space rental may not be used for any portion of an event
(including evening working meetings) where alcohol is served, purchased, or
otherwise available as part of the event or meeting, even if EPA funds are not used
to purchase the alcohol.
3. Costs for training courses for recipient employees (e.g. instructional services) provided
by third parties would be classified as contractual although any travel costs for the employees
would be categorized as travel. Similarly, third party provided training courses for program
participants belong in the contractual category but the travel and or stipends for trainees
would be participant support costs classified as "Other".
4. Stand-alone equipment maintenance or service contracts (i.e., not included in the
purchase price for the equipment) are classified as contractual.
5. Acquisition of printing services for larger scale productions such as books, other bound
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documents, and related graphics services should be classified as contractual. However,
amounts budgeted for document reproduction on an occasional "as needed" basis from self-
service photocopying firms may be classified as "Other".
6. Cost estimates for leased or rented items (equipment, office space) should be included in
the "Other" category.
C. Competition Requirements
1. States
a. As provided in 2 CFR 200.317. states follow the same policies and procedures they
follow for procurements financed with non-Federal funds. States are subject to the
domestic purchasing preferences in 2 CFR 200.322 and the requirement at 2 CFR
200.323 for procurement of recovered materials and "where the purchase price of the
item exceeds $10,000 or the value of the quantity acquired during the preceding fiscal
year exceeded $10,000" per unit and any contract clauses required by 2 CFR 200.326.
State contracts are also subject to the "consultant fee cap" described in 2 CFR 1500.10.
b. All recipients, including states, must comply with EPA's rules for
Disadvantaged Business Enterprises (DBE) at 40 CFR Part 33.
c. EPA defers to state practices on competition for contracts unless the state is subject
to specific conditions under 2 CFR 200.208 which authorize EPA to monitor the state's
procurement practices.
2. Other Recipients
a. Non-state recipients contracting practices must comply with the procurement
requirements in 2 CFR Part 200 (2 CFR 200.317 thru 2 CFR 200.327). Additional
information regarding appropriate procurement procedures is available in OGD's
Best Practice Guide for Procuring Services. Supplies, and Equipment Under EPA
Assistance Agreements, and Appendix 3 of this Cost Review Guidance.
b. As provided by 2 CFR 200.319(b) potential contractors that"... develop or draft
specifications, requirements, statements of work, or invitations for bids or requests
for proposals must be excluded from competing for such procurements."
c. As authorized by 2 CFR 200.320(a). recipients may purchase goods and services
that do not cost more than the Micro-purchase threshold as defined at 2 CFR 200.1
(Generally $10,000 as specified in RAIN-G04-R, Micro-Purchase and Simplified
Acquisition Threshold for Procurements by EPA Assistance Agreement Recipients
and Subrecipients) without competition provided purchases are equitably distributed
among suppliers to the extent practicable and the price is reasonable.5
5 The Office of Management and Budget raised the threshold for micro-purchases from $3,500 to $10,000 on June 20, 2018
as provided for in the National Defense Authorization Acts (NDAA) for Fiscal Years 2017 and 2018.
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(1) Micro-purchases are appropriate where market forces ensure that
prices are competitive (e.g. supplies).
(2) Recipients may not make a series of purchases in a relatively short time
frame from the same source (particularly for professional services) in amounts
at or less than the micro-purchase threshold or less to avoid competition as that
practice would not lead to equitable distribution of purchases from qualified
sources. Simply referring to a consultant or other contractor as a "partner" does
not justify repeated non-competitive micro-purchases to the individual or firm.
(3) Some recipients may have micro-purchase thresholds higher than $10,000
as provided at 2 CFR 200.320(a)(1).
d. For purchases that cost more than the micro-purchase threshold but less than the
Simplified Acquisition Threshold as defined at 2 CFR 200.1 (currently set at
$250,000 by statute as implemented by EPA Policy) recipients may use 2 CFR
200.320(a)(2) small purchase procedures and solicit offers from an adequate number
of sources without formally advertising or otherwise publicizing the contracting
opportunity.
(1) EPA's position as described in the Best Practice Guide for Procuring
Services. Supplies, and Equipment Under EPA Assistance Agreements is
that recipients must obtain documented prices or quotes (e.g. by email or
price list searches) from at least 3 qualified sources to meet this
requirement although recipients may establish procurement procedures that
require solicitations from more sources.
(2) Recipients need not select the lowest priced item or service if it does not meet
requirements or the recipient can otherwise demonstrate that the goods or
services available at a higher price offer the best value. Recipients must,
however, justify a decision to purchase at the higher price and ensure that the
vendor charges similarly situated customers the same price as it is offering to
the recipient, that the price is otherwise reasonable, and document that
decision in the procurement file.
e. Procurements in excess of the Simplified Acquisition Threshold are subject to the
formal competitive requirements of 2 CFR 200.319 and 2 CFR 200.320(c) or (d).
f. The UGG at 2 CFR 200.318(e) encourages recipients to use intergovernmental or
inter-entity agreements for efficient procurement of common goods and services.
For example:
(1) A state may enter into one or more contracts with environmental
consultants that local governments may also use to acquire consulting
services.
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(2) A county government may have a competitively awarded
architecture/engineering (A/E) contract that municipalities within the
county's jurisdiction may use to acquire A/E services.
(3) One or more Institutions of Higher Education or nonprofits may
cooperate to conduct a competition for professional services and award a
single, multi-year contract to the successful offeror.
3. Sole Source Guidance
a. If the recipient is not a State and proposes to award the contract without
competition (i.e., a "sole source"), it must comply with 2 CFR 200.320(c)(6).
b. EPA does not require recipients to identify contractors in proposals or work plans and
EPA staff will not suggest, recommend or direct recipients to hire particular firms or
individuals.
(1) The fact that a recipient has named a contractor in its proposal or work plan as
a "partner" or otherwise does not in and of itself justify a sole source award.
EPA's standard competitive solicitation clause "Contracts and Subawards"
provides guidance on this matter.
(2) When a recipient (other than a state) names a contractor (including a
consultant) in its proposed work plan, EPA's Project Officer or Grant
Specialist may inquire whether the recipient has complied with the
competition requirements in 2 CFR 200.319 and 2 CFR 200.320. . Such an
inquiry is not necessary when the recipient has already described the
competitive process it followed to select the contractor.
(3) EPA provides additional information in the Frequently Asked Questions in
EPA's Guidance on Subawards.
c. If the recipient intends to enter a sole source contract in excess of the micro-purchase
threshold, the recipient should first discuss the matter with EPAs' Project Officer.
The PO may inform the recipient to submit a written request (with appropriate
justification) for EPA approval under 2 CFR 200.320(c)(4) from EPA's Grants
Management Officer. The Grants Management Officer will provide EPA's decision
on the request via email, letter or by issuing the award with a work plan containing
the recipient's sole source justification. Note that as provided at 2 CFR
1500.13(c)(9), denials of requests for procurements through noncompetitive proposals
are not subject to dispute under 2 CFR Part 1500. Subpart E.
(1) Sole source contracts in excess of the micro-purchase threshold should be rare.
(2) Potential justifications include 200.320(f)(1). only one source, 200.320(f)(2).
an emergency, 200.320(f)(3) EPA approval, or 200.320(f)(4) after soliciting a
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number of sources the recipient reasonably decided competition was
inadequate.
(3) EPA's general policy is to require competition in accordance with for
commercially available items (including consulting services) unless due to a
patent, copyright, or equipment maintenance agreement with the
manufacturer, the service or product is available from only one firm or there
is an emergency (e.g. a natural disaster) that precludes competitive bidding.
A contractor's role in preparing a financial assistance application does not, in
and of itself, justify awarding a sole source contract to the individual or firm.
(4) Under 2 CFR 200.324(b). recipients must negotiate profit as a separate element
of cost for sole source procurements other than micro-purchases.
VII. Construction
A. General
EPA's Small and Disadvantaged Business (DBE) rule at 40 CFR 33.103 defines construction
as " . . . erection, alteration, or repair (including dredging, excavating, and painting) of
buildings, structures, or other improvements to real property, and activities in response to a
release or a threat of a release of a hazardous substance into the environment, or activities to
prevent the introduction of a hazardous substance into a water supply." There are also
statutory and regulatory definitions of construction applicable to specific EPA financial
assistance programs (e.g. section 1004(2) of the Solid Waste Disposal Act and 40 CFR
35.2005(b)(13)). However, for the purposes of consistency among EPA grant programs this
Interim Guidance applies the DBE rule's definitions of Construction, Services and Equipment
for the purpose of categorizing costs on the SF 424A budget form. These distinctions also
track requirements for compliance with Davis-Bacon prevailing wage laws on EPA funded
construction projects.
A. Eligible Construction Costs
1. Construction excludes the cost of land acquisition and off-site improvements unless
authorized by statute, (e.g. the definition of "construction" in section 1004(2) of the Solid
Waste Disposal Act includes acquisition of interests in lands).
2. With the exception of Superfund, CERCLA 104(k) Brownfields, and Clean Water Act
sections 319 and 320, certain programs authorized by the Water Infrastructure Improvements
for the Nation Act (WIIN) and grants for construction projects authorized by EPA's annual
appropriation acts (e.g. Congressionally directed spending), construction costs are typically
not eligible under project grants, continuing environmental program grants, and other
agreements covered by this cost review guidance. Construction costs are only allowable
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under project grants if such costs are integrally related to and necessary for an activity that is
authorized in an EPA statute such as a demonstration project. Unless program guidance
provides that construction is an eligible cost, the recipient should consult with the PO to
verify that proposed construction costs are allowable.
3. Construction costs may include site preparation, demolishing and building facilities,
making permanent improvements to facilities or other real property, major renovations of
existing facilities, remediation of contamination and related architectural or engineering
services. With very few exceptions, recipients carry out construction projects by hiring
contractors which typically include a general contractor and an architectural or engineering
firm for design work and in some cases purchasing equipment for installation at the site.
4. The recipient should provide a list of planned construction contracts along with a brief
description of the scope of work or services to be provided, planned duration, and planned
procurement method (competitive or non-competitive), if known. Recipients should consult
the guidance on contracting in Section VI for additional information on competition
requirements. The cost plus percentage of construction cost method of contracting is
prohibited by 2 CFR 200.324(d).
B. Categorizing Construction Costs.
Construction costs are to be categorized on the SF 424A budget table as follows:
1. Anticipated costs for hiring general contractors and other contractors performing activities
described in the DBE Rule's definition of Construction will be categorized as
"Construction".
2. Anticipated costs for pre-construction architectural and engineering Services as defined in
the DBE rule for design and specifications documents will be categorized as "Contractual".
3. Anticipated costs for separately purchased Equipment as defined in the DBE Rule that will
be installed in a facility or used to remediate contamination will be categorized as
"Equipment".
4. Anticipated costs for land acquisition or relocation assistance paid to individuals or
businesses will be categorized as "Other".
5. Force Account - If recipient personnel or equipment are to be used to perform eligible
construction project work (e.g. engineering, inspection, waste removal) under force account,
approval must be obtained from an Authorized EPA Official either at time of award or in
response to a post-award written request. Force account work must be more economical than
contracting the work out or necessitated by emergency. Recipients must demonstrate that
recipient personnel have the necessary competence to do the work. Force account costs for
personnel are budgeted in the "Personnel" and "Fringe Benefit categories. Costs for
equipment purchased for the project are budgeted in the "Equipment" category. Usage
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charges for equipment in recipients' existing inventory is categorized as "Other". All force
account costs must be supported by adequate financial records as required by 2 CFR 200.302,
2 CFR 200.430 and 2 CFR 200.431. Note that recipients must maintain records
demonstrating that equipment usage charges are reasonable based on lease rates for similar
equipment in the relevant market.
C. Prevailing Wages
Davis Bacon (DB) prevailing wage requirements apply only when the statute authorizing the
EPA financial assistance program imposes DB. For example, Superfund, Brownfields, the
Clean Water and Drinking Water State Revolving Funds, Clean Water Act sections 319 and
320 (for construction of treatment works), and certain grant programs authorized by WIIN
are subject to DB.
D. Relocation Costs.
The Uniform Relocation Assistance and Real Property Acquisition Policies Act (URA) is a
federal law that establishes minimum standards for federally funded programs and projects
that result in the acquisition of real property or displacement of persons from their residences,
businesses, or farms. The U.S. Department of Transportation's regulations implementing the
Uniform Relocation Act are found at 49 CFR Part 29 and have been adopted by EPA as
provided in 40 CFR 4.1. Essentially, only persons or businesses who have been displaced as
a direct result of an EPA funded project are eligible for relocation assistance.
Given the complex nature of the URA, the applicability of the URA to EPA funded projects is
decided on a case-by-case basis by an authorized EPA Official. Recipients should consult with
the PO prior to making any payments for relocation costs with EPA funds. For more
information about requirements under the URA, definitions and other information, see the U.S.
Department of Housing and Urban Development's URA Handbook.
VIII. Other
A. General
This category must include only those types of direct costs that do not fit in any of the
specific budget categories. Examples of costs that may be in this category are:
1. Insurance and indemnification 2 CFR 200.447.
2. Telephone service and utilities.
3. Occasional document reproduction at local copying centers.
4. Capitalization funding for revolving loan programs.
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5. Third party in-kind contributions towards cost share 2 CFR 200.306.
6. Tuition remission and scholarships under agreements with educational
institutions under 2 CFR 200.466.
7. Rental/lease of equipment, office space, and meeting or conference facilities
additional guidance in Subsection C. below).
8. Participant support costs (additional guidance in Subsection D, below).
9. Subawards (additional guidance in Subsection E. below).
10. Land acquisition costs when authorized under the financial assistance program.
B. Special Considerations for Other Direct Costs
1. Recipient budget narratives for the "Other" category should include line item amounts
for all costs the recipient characterizes as "Other" so that EPA staff are aware of the
composition of costs in the category. All costs classified as "Other" must be necessary
for the EPA funded project.
2. Under 2 CFR 200.400(g) and EPA policy, reflected in the General Terms and Conditions
of EPA assistance agreements, any "management fees" or similar charges that amount to
a "profit" are unallowable since they are not costs directly related to performing the
project or approved by a cognizant Federal agency as indirect costs. Recipients may not
include such fees in the "Other" category.
3. Contingency reserves for major projects such as construction or information
technology infrastructure, which are categorized as "Other" are addressed at 2
CFR 200.433.
C. Rental/Lease
1. The allowability of costs for renting equipment (including vehicles), office, laboratory or
conference/meeting space is governed by 2 CFR 200.465.
2. Rental costs for a recipient's "main office" are typically included in the indirect cost pool.
a. Some organizations have central indirect rates that cover only the broader
organization and not specific divisions or satellite offices or labs. In these instances,
and other situations when a recipient rents space for a discrete activity necessary to
carry out the assistance agreement, rental costs may be charged directly provided the
rates are reasonable and fully or partially allocable to the agreement.
b. In instances where the rental costs are only partially allocable to a particular grant,
the recipient must have an appropriate allocation methodology to distribute these
costs among all appropriate funding sources.
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3. Examples of situations in which rental costs may be fully allocable to an assistance
agreement include space rented for a conference, training course, community meeting or
temporary use of a laboratory. Refer to 2 CFR 200.465(a) for additional guidance.
4. EPA staff and auditors may pay additional attention to situations in which a recipient is
directly charging rent for a facility or equipment on a "sale and lease back" arrangement or
that it owns or is owned by a related party that is leased on a "less than arms-length" basis.
The amount of rent that is allowable is limited by 2 CFR 200.465(b) and (c).
5. Conference/meeting facility rental charges may include meals and light refreshments per 2
CFR 200.432 as well as audio-visual services. Additional guidance on EPA's policies for
the use of financial assistance funds for meals and light refreshments is available in Section
VI. B. 2. a. through e. above. Recipients must compete requirements for
conference/meeting facilities when the amount of the charges are expected to exceed the
current micro-purchase threshold. Refer to the guidance in the Competition Requirements
in Section VI. Cn Contractual Category for additional information.
6. Leases and other rental agreements with costs that will be charged directly to the EPA
assistance agreement are procurements are generally subject to the competition
requirements of 2 CFR 200.319 and 2 CFR 200.320. Two exceptions are when the amount
of allowable rental costs are governed by the "sale and lease back" or "less than arms-
length" rules at 2 CFR 200.465(b) and (c) apply.
D. Participant Support Costs
1. The UGG defines Participant Support Costs at 2 CFR 200.1 as: " . . . direct costs for items
such as stipends or subsistence allowances, travel allowances and registration fees paid to or
on behalf of participants or trainees (but not employees) in connection with conferences or
training projects." EPA regulations at 2 CFR 1500.1 expand the definition of Participant
Support Costs to include subsidies, rebates and other payments to program beneficiaries to
encourage participation in statutorily authorized environmental stewardship programs.
Participant support costs are allowable with prior EPA approval as provided at 2 CFR
200.456. EPA has issued detailed Guidance on Participant Support Costs.
2. Participant support costs may include:
a. Stipends for interns, fellows, trainees, or attendees at community meetings
including registration fees, training materials, and travel costs when the purpose of
the trip is to participate in the project activity.
b. Travel assistance to non-employee program participants (e.g. travel assistance that
nonprofit "co-regulator" organizations provide to state and tribal workgroup
members).
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c. Stipends and other incentives paid to participants in research experiments, focus
groups, surveys or similar research activities.
d. Examples of allowable subsidy and rebate program costs include:
(1) Rebates or other subsidies provided to program beneficiaries for
purchases of commercially available, standard ("off the shelf') pollution
control equipment or low emission vehicles under the Diesel Emission
Reduction Act program when the program participant, rather than the
recipient, owns the equipment.
(2) Subsidies or rebates provided to program beneficiaries to encourage
participation in statutorily authorized programs to encourage environmental
stewardship such as Best Management Practices under Clean Water Act 319
nonpoint source management programs, subsidies to promote adoption of
source reduction practices by businesses under section 6605 of the Pollution
Prevention Act, rebates or subsides for wood stove replacement, low
emission vehicle purchases, or purchase and installation of pollution control
devices under financial assistance programs authorized by the Clean Air
Act or EPA's annual appropriation acts.
(3) Other payments to or on behalf of Project/Program beneficiaries that
EPA determines to be statutorily authorized.
3. Requirements for allowability of participant support costs.
a. Participant support costs should included as a separate line item in the
recipients' budget narrative.
b. Participant support costs are only allowable if the EPA Award Official approves
the recipient's description of the activities that will be supported and budget
narrative for participant support costs by awarding the financial assistance
agreement. Alternatively, the recipient may request EPA approval for participant
support costs after award by working with EPA's Project Officer to submit a
justification to EPA's Grants Management Officer.
c. Under 2 CFR 200.308(c)(l)(v) recipients must obtain prior EPA approval for
post-award transfers of funds budgeted for participant support costs to other
direct cost categories.
d. As provided in the definition of Modified total direct costs at 2 CFR 200.1.
recipients must exclude participant support costs from their Modified Total
Direct Cost base for the purposes of applying indirect cost rates.
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e. When a recipient intends to use EPA funds to pay fellowships or other stipends
to students or provide tuition remission of fund scholarships for students, the
programmatic terms of the EPA assistance agreement will include the "Term and
Condition for Fellowship, Internship, Scholarship and Similar Programs
Supported by EPA Financial Assistance". Among other things, this Term and
Condition requires that EPA funded participants in these programs be citizens of
the United States, its territories, or possessions, or lawfully admitted to the
United States for permanent residence.
4. Recipients should specify the amount of travel assistance they intend to provide program
participants and explain the purpose of the trips the program participants will take.
a. If the recipient proposes international travel for program participants, the
recipient will work with the Project Officer to obtain and document the proper
approvals from EPA's Office of International and Tribal Affairs (OITA).
International travel includes trips to Mexico and Canada but does not include
trips to Puerto Rico, the U.S. Territories or possessions. Recipients that routinely
travel to Mexico and Canada by motor vehicle (e.g. for sampling or meetings)
may describe their travel in general terms in the application. OITA may then
approve the travel generally as opposed to requiring OITA approval on a trip-by-
trip basis.
b. If the recipient advises EPA's Project Officer that EPA funds will not be used for
international travel by program participants, or the recipient has not identified all
types of program participant travel, EPA's General Terms and Conditions require
prior OITA approval for international travel.
E. Subawards
1. Subawards (i.e. "Subgrants") are a distinct type of cost under the "Other" category and
are subject to stringent requirements in the UGG at 2 CFR 200.331 and 200.332 as well
as EPA's Subaward Policy. GPI16-01.
a. As provided in the definition of Subaward at 2 CFR 200.1 and 2 CFR 200.331(a)
the term "subaward" means an award of financial assistance (money or property) by
a pass-through entity (the recipient) to a subrecipient to carry out part of the EPA
funded project even if the recipient provides the assistance under an instrument
designated as a "contract." When a recipient provides a subaward to a subrecipient,
the recipient becomes a Pass-through entity as defined at 2 CFR 200.1.
b. The term "subaward" does not include:
(1) Technical assistance in the form of services instead of money or other
assistance in the form of revenue sharing or direct appropriations.
(2) Payments to program beneficiaries such as participant support costs.
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c. Loans, loan guarantees, interest subsidies and similar assistance provided to
borrowers in EPA revolving loan fund capitalization grants for programs other than
the Clean Water and Drinking Water State Revolving Funds6 are subawards for the
purposes of Internal controls at 2 CFR 200.303. Requirements for pass-through
entities at 2 CFR 200.332 and the 2 CFR Part 170 requirements for Reporting
Subaward and Executive Compensation Information. The extent to which these
requirements apply to EPA may be further described in the terms and conditions of
the EPA assistance agreement.
d. As provided in 2 CFR Part 25. 2 CFR Part 170. and the definition of Subrecipient in
2 CFR 200.1. Federal agencies are subrecipients when they receive "subawards"
from pass-through entities. Nonetheless, Federal agencies must have statutory
authority to provide services to non-Federal entities on a reimbursable basis or
otherwise receive and use funds from non-Federal entities under subawards. See
Section 7.0 (b) of EPA's Subaward Policy for additional information.
e. Contract as defined at 2 CFR 200.1 is " . . . the legal instrument by which a
recipient or subrecipient purchases property or services needed to carry out
the project or program under a Federal award." Differences between
subrecipients and contractors are described in 2 CFR 200.331 and Appendix
A of EPA's Subaward Policy. Transactions between recipients and for-
profit firms or individual consultants are in almost all cases procurement
contracts subject to the competition requirements in 2 CFR 200.319 and 2
CFR 200.320 rather than subawards that generally may be made without
competition. However, as indicated in Appendix A of EPA's Subaward
Policy there may be situations in which a subaward to a for-profit firm is
appropriate such as when the recipient is paying for installation of pollution
control technology at a commercial facility.
(1) EPA's Recipient Subaward Frequent Questions provide information on
EPA's policies for determining whether transactions are subawards,
procurement contracts, or another type of transaction.
(2) Recipients should consult with EPA staff if there are questions regarding
whether a particular transaction is a procurement contract or a subaward.
2. As provided by Section 8.0(a) of the Subaward Policy recipients must provide the
aggregate amount they propose to allocate to subawards as a separate line item in the
"Other" category. Amounts for subawards in the form of loans, loan guarantees, interest
subsidies and similar arrangements must also be included in the line item in the "Other'
budget category for subawards. Recipients must provide separate line items for amounts
6 As provided at 2 CFR 1500.3(b). "... the requirements for subrecipient monitoring and management at 2 CFR 200.331
through 200.333 do not apply to loan, loan guarantees, interest subsidies and principal forgiveness, purchases of insurance or
local government debt or similar transactions with borrowers by recipients of Clean Water State Revolving Fund (CWSRF)
capitalization grants and Drinking Water State Revolving Fund (DWSRF) capitalization grants." Other regulatory
requirements do apply to the CWSRF and DWSRF as specified in 2 CFR 1500.3(b) and 40 CFR Part 35.
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estimated for subawards to borrowers and subawards to other types of subrecipients.
3. If recipients erroneously place funding estimates for subawards in the "Contractual"
EPA staff will ask recipients to submit a revised budget except for state and tribal
continuing environmental program grants covered by Grants Policy Issuance (GPI) 12-
06 and GPI 13-02 when "pen and ink" changes to recipient budgets are acceptable.
a. Pass-through entities must provide a description of the types of activities to be
supported with subawards in either the budget narrative or the scope of work to
comply with the prior approval provision of 2 CFR 200.308(c)(l)(vi).
b. The Subaward Policy does not require that Pass-through entities identify
subrecipients or the amount of anticipated funding for specific subawards
although some do so voluntarily particularly for competitive proposals.
c. Under 2 CFR 200.308(c)(l)(vi) recipients must obtain prior EPA approval for
post-award for subawards that are not described in the scope of work for the
agreement and budgeted for in the aggregate line item in the recipient's budget
narrative. EPA's Recipient Subaward Frequent Questions contains additional
guidance on when EPA approval is required for changes to a pass-through entity's
subaward plans.
4. There may be situations in which a funding arrangement of $10,000 or less between a
state, tribal, or local government and a nonprofit organization, between two nonprofit
organizations or between different units of government that EPA would normally
consider to be a subaward may be executed as a micro-purchase under 2 CFR
200.320(a)(1) for reasons of efficiency. For example:
a. Several nonprofit and governmental recipients want to support a particular
nonprofit's participation in an ongoing forum for coordinating cross-program
communication, issue analysis and discussion, joint project development and
other matters of mutual interest relating to an EPA financial assistance
program. Each transaction will be approximately $5,000.
b. A recipient conducting an EPA funded public education project wants to
support the participation of several local community based nonprofit
organizations in an outreach meeting. The estimated cost for compensating
each nonprofit is $3,000.
In both examples, rather than developing multiple subaward agreements that meet
the extensive requirements of 2 CFR 200.332. the recipients could determine that the
use of micro-purchase procedures would be a more cost-effective means of
compensating the non-profits for the activities they will carry out. This approach is
consistent with the coverage in Appendix A in the Subaward Policy on recipients
using contracts rather than subawards to acquire ancillary services from nonprofit
organizations.
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5. Micro-purchase procedures may not be used to simply transfer funds from the
recipient to another organization. The Non-federal entity receiving the micro-
purchase contract must be compensated for carrying out activities necessary for the
execution of the recipient's work plan.
a. The cost for compensating the Non-federal entity receiving the micro-
purchase order must meet the reasonableness requirement of 2 CFR 200.404.
b. Invoices or other contractual documents describing the activities that will be
carried out under the micro-purchase arrangement are necessary to meet the
documentation requirements of 2 CFR 200.318(i).
6. The National Subaward Term and Condition. Subaward Policy Appendix B. provides
that pass-through entities must work with EPA's Project Officer to obtain the written
consent of OITA, prior to awarding a subaward to a foreign government or international
organization, or a subaward that will be performed in a foreign country. This
requirement applies even if the recipient describes the subaward in a proposed scope of
work. Foreign countries include Mexico and Canada but do not include Puerto Rico the
U.S. Territories or possessions.
7. As provided in the definition of Modified total direct costs at 2 CFR 200.1 pass-through
entities may only include up to the first $25,000 of each subaward in the MTDC pool for
the purposes of distributing indirect cost rates unless the pass-through entity's Federal
negotiated indirect cost rate provides otherwise. Section 8.0(c) of the Subaward Policy
authorizes the GS to make inquiries necessary to ensure recipients comply with this
limitation.
IX. Indirect Costs (Grant Specialists Only)
A. Definitions
1. Indirect costs (IDC) as defined in 2 CFR 200.1 are "... those costs incurred for a
common or joint purpose benefitting more than one cost objective, and not readily
assignable to the cost objectives specifically benefitted, without effort disproportionate to
the results achieved (e.g. functions necessary for the general operations of the organization,
such as space costs, utilities, accounting services, human resource services, etc.). Indirect
costs may also be referred to as "Facilities and Administrative" costs.
2. Modified total direct costs (MTDC) is also defined in 2 CFR 200.1.
B. EPA IDC Policies
1. EPA's general IDC policy is available on EPA's internet site at Indirect Cost Policy for
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Recipients of EPA Assistance Agreements and additional information is available in RAIN-
2018-G02-R. Indirect Cost Guidance for Recipients of EPA Assistance Agreements. Note
that EPA provides a list of EPA financial assistance programs with Statutory Restrictions on
Indirect Costs.
2. In order for recipients to use EPA funding for indirect costs, the IDC category of the
assistance agreement award budget must include an amount for IDCs and at least one of the
following must apply:
a. With the exception of "exempt" agencies and Institutions of Higher Education as
noted below, all recipients must have one of the following current (not expired) IDC
rates, including IDC rates that have been extended by the cognizant agency:
(1) Provisional;
(2) Final;
(3) Fixed rate with carry-forward;
(4) Predetermined;
(5) 10% de minimis rate authorized by 2 CFR 200.414(f): or,
(6) EPA-approved use on an exception basis of an expired fixed rate with carry-
forward for EPA assistance agreements as detailed in section 6.4.a. of the
IDC Policy.
Procedures for requesting exceptions are available in Indirect Cost Guidance
for Recipients of EPA Assistance Agreements.
b. "Exempt" state or local governmental departments or agencies are agencies that
receive up to and including $35,000,000 in Federal funding per the department or
agency's fiscal year, and must have an IDC rate proposal developed in accordance
with 2 CFR 200 Appendix VII. with documentation maintained and available for
audit.
c. Institutions of Higher Education must use the IDC rate in place at the time of
award for the life of the assistance agreement (unless the rate was provisional at
time of award, in which case the rate will change once it becomes final). As
provided by 2 CFR Part 200. Appendix 111(C)(7), the term "life of the assistance
agreement", means each competitive segment of the project. Additional information
is available in the regulation.
3. IDCs incurred during any period of the assistance agreement that are not covered by the
provisions above are not allowable costs and must not be drawn down by the recipient.
Recipients may budget for IDCs pending approval of their IDC rate by the cognizant
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Federal agency or an exception granted by EPA under section 6.3 or 6.4 of the IDC Policy.
However, recipients may not draw down IDCs until their rate is approved or EPA grants an
exception.
C. Distribution of IDC Charges
1. Most non-profit recipients and IHEs distribute their indirect cost rates to MTDC as
provided in UGG Appendix III. Section C. 2. and Appendix IV. Section B. 2. c. State,
tribal and local government recipients including some interstate organizations do not
necessarily use MTDC as the basis for distributing indirect costs. As provided in UGG
Appendix VII. Section C., the IDC rate agreement with the cognizant Federal agency may
provide for other distribution bases for governmental recipients. Recipients to provide
documentation of the distribution basis for their IDCs when applying for EPA funding
unless that information is already available in EPA's files.
2. Under the definition of Modified total direct costs at 2 CFR 200.1. the MTDC includes
only the first $25,000 of each subaward. Procurement contracts are not covered by this
restriction. MTDC does not include participant support costs, tuition remission, scholarships
and fellowships. Therefore, these costs must be excluded from MTDC when applying indirect
costs. These limitations on MTDC restrict the distribution of the recipient's indirect cost
substantially recipients subject to MTDC must ensure that their budgets reflect the appropriate
distribution for subawards and that participant support costs or other items that are excluded
from MTDC are properly accounted for when describing how IDCs are distributed.
3. Examples of IDC Rate base distribution calculations are shown below:
a. Personnel Salaries (Indirect Rate x Personnel = IDC)
b. Personnel Salaries and Fringe (Indirect Rate x Personnel & Fringe = IDC)
c. Modified Total Direct Costs (Indirect Rate x MTDC = IDC)
4. Unless the recipient's rate agreement expressly authorizes distribution of indirect costs to
total direct costs, this form of rate distribution is not allowable. Authorizations to distribute
IDC to total direct charges are very rare.
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Appendix 1 - Document Acronyms
A/E - Architecture/Engineering
CERCLA - Comprehensive Environmental Response Compensation and Liability Act
CEP - Continuing Environmental Program Grant
CFR - Code of Federal Regulations
DB - Davis Bacon
DBE - Disadvantaged Business Enterprise
EPA - Environmental Protection Agency
FAR - Federal Acquisition Regulations
FTE - Full Time Equivalent
GMO - Grant Management Officer
GS - Grant Specialist
GSA - General Services Administration
IDC - Indirect Costs
IHE - Institution of Higher Education
IPA - Intergovernmental Personnel Act
MTDC - Modified Total Direct Cost
OGD - Office of Grants and Debarment (EPA)
OPM - Office of Personnel Management
PI - Program Income
PO - Project Officer
SF - Standard Form
UGG - Uniform Grant Guidance (aka 2 CFR Part 200)
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Appendix 2 - Sample Budget Detail/Narrative
*Please note - Both federal and non-federal funds must be listed in the budget detail/narrative*
Background. This fictitious sample budget detail/narrative is based on a hypothetical EPA assistanceagreement
supporting an Urban Waters project that involves water quality sampling, analysis of the results, and outreach to the
community to encourage efforts to improve water quality. The agreement requires a recipient cost share of 10% of
total project costs.
Notes:
The recipient should identify its equipment cost threshold if it is lower than the $5,000 level specifiedat 2 CFR
200.33.
The sample calls for the recipient to attach its negotiated indirect cost rate agreement. If an recipientdoes not have
an indirect cost rate it should attach an explanation of how indirect costs, if any, are determined in accordance with
the budget guidance. For more information about indirect costs, refer toindirect cost policy, guidance, and training
in RAIN-2018-G02.
Budget Detail/Narrative Sample:
Personnel:
i Requested from
| EPA
Cost Share
provided by
recipient
(if applicable)
Total
Salaries and Wages 1
(1) Project Manager |
@ $47/hr x 323 hours I
$15,181
$15,181
(1) Project Assistant @ $24/hr x 200 hours
$4,800
$4,800
(1) Community Relations Coordinator @ $23/hrx 1
150 hours I
$3,450
$3,450
Total j
$18,631
$ 4,800
$23,431
Fringe Benefits:
1 I
Cost Share
}
Rate/Base/Composition
! Requested from I
provided by
Total I
! EPA I
recipient
(if applicable)
31% of Personnel costs (FICA, retirement, health, 1 ! '
vacation, sick leave) $5,776: $ 1,488 $7,264:
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Travel:
Cost Share
See Narrative Note 1.
Requested from
EPA
provided by
recipient
(if applicable)
Total
2 National Conferences including lodging, air,
per-diem and registration fees for 2 employees.
(See Narrative Note 2.)
$4,492
$4,492
Local travel for sampling and meetings. (P.O. V.
@ $0.58 per mile and actual cost for public
transit)
Travel to one-week training course on innovative
sampling techniques including lodging, train and
per-diem for 1 employee. (See Narrative Note 3.)
Total
$ 150
$2,500
$7,142
$150
$2,500
$7,142
Equipment: (Equipment Capitalization Threshold = $5,000)
Description
Purpose
Unit Cost
Quantity
Cost Share
provided by
Requested from recipient (if
EPA applicable)
Total
MicrowaveDigester
Lab
Analysis
$17,500
1
$17,500
$17,500
12 Foot Motorized
Skiff and trailer.
(See Narrative Note
4.)
Sampling
1
$6,000
$6,000
Total
Supplies
Type
$23,500:
Requested from
EPA
Computer Software
$2,500
Office Supplies (pens, pencils, paper, chairs,etc.)
2 Lap Top Computers @ $2000 each.
Total
$825
Cost Share
provided by
recipient
(if applicable)
$4,0001
$7,3251
$23,500
Total
$2,500
S825
$4,000'
S7,325
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Contractual
Contractual *
(competitive process will be used to determine
contractors when required by regulation)
Advertising for public meetings (Newspapers)
Environmental Sampling Firm to designsampling
protocol and assist with data evaluation.
Community Meeting Facilitator - $524/ day x30
days (rate complies with limitation on individual
consultant fees)
Total
Requested from
EPA
$1,000
$120,000
Cost Share
provided by
recipient
(if applicable)
$ 15,720
$136,720
$20,000
$20,000
Total
$1,000
$140,000
$15,720
$156,720
Other
Type
Requested from
EPA
Cost Share
provided by
recipient
(if applicable)
Total
Postage for Flyers for Community meetings.
! $6111 $611
Subaward to Friends of the Wolf River (See
Narrative Note 5)
Travel to National Conference for 4 Community
Members (See Narrative Note 6)
$30,000
$9,000
$1,000
$30,000
$10,000
Printing Costs (Occasional use of large copiersat
Office Depot).
Total
$39,000
$1,200
$2,81 1
$1,200
$41,811
Indirect Costs:
Base (See Narrative Note 7)
26% of Personnel and Fringe Benefits and first
$25,000 of Subaward Costs
Cost Share
Requested from
provided by
Total
EPA
recipient
(if applicable)
$14,480
$14,480
45
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Total Budget Summary
j Requested from
Cost Share provided 1
Total
1 EPA
by recipient I
1
(if applicable) I
Personnel
$18,631
$ 4,800
$23,431
Fringe Benefits
| $5,776
SI.4SS
$7,264
Travel
| $7,142
I
$7,142
Equipment
$23,500
$23,500
Supplies
1 $7,325
$7,325
Contractual
1 $136,720
$20,060!
$156,720
Other
$39,000
S2.SI 1
$41,811
Indirect Costs
$14,480
$14,480
Total
j $252,574
$29,099)
$281,673
Recipient cost share calculation: $29,099 / $281,673 = 10.33%
Narrative Note 1. There is no international travel for this project.
Narrative Note 2. The Project Manager and Community Relations Coordinator will make presentations on interim
and final project results at the 2019 and 2020 National Urban Waters conferences. Travel reimbursement will be
based on GSA per-diem rates.
Narrative Note 3. The Program Assistant will attend a one-week training on innovative sampling techniques at
Tulane University.
Narrative Note 4. Our equipment threshold is $5,000. We have determined based on the frequency and timing of
the sampling activity that purchasing a small motorized skiff and a trailer is more cost effective than boat rentals.
Additionally, some sampling will take place in remote areas in which boat rentals are not available.
Narrative Note 5. We will partner with Friends of the Wolf River to encourage community participation in the
project. Friends is a 501(c)(3) nonprofit organization that promotes conservation of the Wolf River. Among other
things, Friends will pay stipends and travel support to community members who attend focus groups and
participate in training to prevent disposal of cooking grease in household drains. Friends of Wolf River
understands that the stipends and participant travel are Participant Support costs that are excluded from its
Modified Total Direct Cost base for distributing indirect costs.
Narrative Note 6. Four community members will attend the 2019 and 2020 National Urban Waters conferences
(two at each conference) to participate in our presentations.
Narrative Note 7. We have attached our most recent negotiated indirect cost rate agreement.
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