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§ 66.22

advance payments described in para-
graph (c) of this section, and the Fed-
eral agency has determined that reim-
pbursement is not feasible because the
grantee lacks sufficient working cap-
ital, the awarding agency may provide
cash or a working capital advance
basis. Under this procedure the award-
ing agency shall advance cash to the
grantee to cover its estimated dis-
pursement needs for an initial period
generally geared to the grantee’s dis-
bursing cycle. Thereafter, the awarding
agency shall reimburse the grantee for
its actual cash disbursements. The
working capital advance method of
payment shall not be used by grantees
or subgrantees if the reason for using
such method is the unwillingness or in-
ability of the grantee to provide timely
advances to the subgrantee to meet the
subgrantee’s actual cash disburse-
ments.

(f) Effect of program income, refunds,
and audit recoveries on payment. (1)
Grantees and subgrantees shall dis-
burse repayments to and interest
earned on a revolving fund before re-
questing additional cash payments for
the same activity.

(2) Except as provided in paragraph
(f)(1) of this section, grantees and sub-
grantees shall disburse program in-
come, rebates, refunds, contract settle-
ments, audit recoveries and interest
earned on such funds before requesting
additional cash payments.

(g) Withholding payments. (1) Unless
otherwise required by Federal] statute,
awarding agencies shall not withhold
payments for proper charges incurred
by grantees or subgrantees unless—

i) The grantee or subgrantee has
failed to comply with grant award con-
ditions or

(ii) The grantee or subgrantee is in-
debted to the United States.

(2) Cash withheld for failure to com-
ply with grant award condition, but
without suspension of the grant, shall
be released to the grantee upon subse-
quent compliance. When a grant is sus-
pended, payment adjustments will be
made in accordance with § 66.43(c).

(3) A Federal agency shall not make
payment to grantees for amounts that
are withheld by grantees or sub-
grantees from payment to contractors
to assure satisfactory completion of

28 CFR Ch. | (7-1-10 Edition)

work. Payments shall be made by the
Federal agency when the grantees or
subgrantees actually disburse the with-
held funds to the contractors or to es-
crow accounts established to assure
satisfactory completion of work.

(h) Cash depositories. (1) Consistent
with the national goal of expanding the
opportunities for minority business en-
terprises, grantees and subgrantees are
encouraged to use minority banks (a
bank which is owned at least 50 percent
by minority group members). A list of
minority owned banks can be obtained
from the Minority Business Develop-
ment Agency, Department of Com-
merce, Washington, DC 202380.

(2) A grantee or subgrantee shall
maintain a separate bank account only
when required by Federal-State agree-
ment.

(1) Interest earned on advances. Except
for interest earned on advances of
funds exempt under the Intergovern-
mental Cooperation Act (31 U.S.C. 6501
et seq.) and the Indian Self-Determina-
tion Act (23 U.S.C. 450), grantees and
subgrantees shall promptly, but at
least quarterly, remit interest earned
on advances to the Federal agency. The
grantee or subgrantee may keep inter-
est amounts up to $100 per year for ad-
ministrative expenses.

§66.22 Allowable costs.

(a) Limitation on use of funds. Grant
funds may be used only for:

(1) The allowable costs of the grant-
ees, subgrantees and cost-type contrac-
tors, including allowable costs in the
form of payments to fixed-price con-
tractors; and

(2) Reasonable fees or profit to cost-
type contractors but not any fee or
profit (or other increment above allow-
able costs) to the grantee or sub-
grantee.

(b) Applicable cost principles. For each
kind of organization, there is a set of
Federal principles for determining al-
lowable costs. Allowable costs will be
determined in accordance with the cost
principles applicable to the organiza-
tion incurring the costs. The following
chart lists the kinds of organizations
and the applicable cost principles.

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Department of Justice

For the costs of a—

Use the principles in—

State, local or Indian tribal
government.

Private nonprofit organization
ather than an (1) institution
of higher education, (2)
hospital, or (3) organization
named in OMB Circular A—
122 as not subject to that
circular.

Educational institutions. .........

For-prafit arganization other
than a hospital and an or-
ganization named in OBM
Circular A-122 as not sub-
ject to that circular.

OMB Circular A-87.

OBM Circular A-122.

OMB Circular A-21.

48 CFR part 31. Contract
Cost Principles and Proce-
dures, of uniform cost ac-
counting standards that
comply with cast principles

acceptable to the Federal
agency.

§66.23 Period of availability of funds.

(a) General. Where a funding period is
specified, a grantee may charge to the
award only costs resulting from obliga-
tions of the funding period unless car-
ryover of unobligated balances is per-
mitted, in which case the carryover
balances may be charged for costs re-
sulting from obligations of the subse-
quent funding period.

(b) Liguidation of obligations. A grant-
ee must liquidate all obligations in-
curred under the award not later than
90 days after the end of the funding pe-
riod (or as specified in a program regu-
lation) to coincide with the submission
of the annual Financial Status Report
(SF-269). The Federal agency may ex-
tend this deadline at the request of the
grantee.

§66.24 Matching or cost sharing.

(a) Basic rule: Costs and contributions
acceptable. With the qualifications and
exceptions listed in paragraph (b) of
this section, a matching or cost shar-
ing requirement may be satisfied by ei-
ther or both of the following:

(1) Allowable costs incurred by the
grantee, subgrantee or a cost-type con-
tractor under the assistance agree-
ment. This includes allowable costs
porne by non-Federal grants or by oth-
ers cash donations from non-Federal
third parties.

(2) The value of third party in-kind
contributions applicable to the period
to which the cost sharing or matching
requirements applies.

(b) Qualifications and exceptions—(1)
Costs borne by other Federal grant agree-
ments. Except as provided by Federal

§ 66.24

statute, a cost sharing or matching re-
quirement may not be met by costs
borne by another Federal grant. This
prohibition does not apply to income
earned by a grantee or subgrantee from
a contract awarded under another Fed-
eral grant.

(2) General revenue sharing. For the
purpose of this section, general revenue
sharing funds distributed under 31
U.S.C. 6702 are not considered Federal
grant funds.

(3) Cost or contributions counted to-
wards other Federal costs-sharing require-
menis. Neither costs nor the values of
third party in-kind contributions may
count towards satisfying a cost sharing
or matching requirement of a grant
agreement if they have been or will be
counted towards satisfying a cost shar-
ing or matching requirement of an-
other Federal grant agreement, a Fed-
eral procurement contract, or any
other award of Federal funds.

(4) Costs financed by program income.
Costs financed by program income, as
defined in §66.25, shall not count to-
wards satisfying a cost sharing or
matching requirement unless they are
expressly permitted in the terms of the
assistance agreement. (This use of gen-
eral program income is described in
§ 66.25(g).)

(5) Services or property financed by in-
come earned by contractors. Contractors
under a grant may earn income from
the activities carried out under the
contract in addition to the amounts
earned from the party awarding the
contract. No costs of services or prop-
erty supported by this income may
count toward satisfying a cost sharing
or matching requirement unless other
provisions of the grant agreement ex-
pressly permit this kind of income to
be used to meet the requirement.

(6) Records. Costs and third party in-
kind contributions counting towards
satisfying a cost sharing or matching
requirement must be verifiable from
the records of grantees and subgrantee
or cost-type contractors. These records
must show how the value placed on
third party in-kind contributions was
derived. To the extent feasible, volun-
teer services will be supported by the
same methods that the organization
uses to support the allocability of reg-
ular personnel costs.

199

§ 66.24

(1) Special standards for third party in-
kind contributions. (i) Third party in-
kind contributions count towards sat-
isfying a cost sharing or matching re-
quirement only where, if the party re-
ceiving the contributions were to pay
for them, the payments would be allow-
able costs.

(ii) Some third party in-kind con-
tributions are goods and services that,
if the grantee, subgrantee, or con-
tractor receiving the contribution had
to pay for them, the payments would
have been an indirect costs. Costs shar-
ing or matching credit for such con-
tributions shall be given only if the
grantee, subgrantee, or contractor has
established, along with its regular indi-
rect cost rate, a special rate for allo-
cating to individual projects or pro-
grams the value of the contributions.

(iii) A third party in-kind contribu-
tion to a fixed-price contract may
count towards satisfying a cost sharing
or matching requirement only if it re-
sults in:

(A) An increase in the services or
property provided under the contract
(without additional cost to the grantee
or subgrantee) or

(B) A cost savings to the grantee or
subgrantee.

(iv) The values placed on third party
in-kind contributions for cost sharing
or matching purposes will conform to
the rules in the succeeding sections of
this part. If a third party in-kind con-
tribution is a type not treated in those
sections, the value placed upon it shall
be fair and reasonable.

(c) Valuation of donated services—(1)
Volunteer services. Unpaid services pro-
vided to a grantee or subgrantee by in-
dividuals will be valued at rates con-
sistent with those ordinarily paid for
similar work in the grantee’s or sub-
grantee’s organization. If the grantee
or subgrantee does not have employees
performing similar work, the rates will
be consistent with those ordinarily
paid by other employers for similar
work in the same labor market. In ei-
ther case, a reasonable amount for
fringe benefits may be included in the
valuation.

(2) Employees of other organizations.
When an employer other than a grant-
ee. subgrantee, or cost-type contractor
furnishes free of charge the services of

28 CFR Ch. | (7-1-10 Edition)

an employee in the employee’s normal
line of work, the services will be valued
at the employee's regular rate of pay
exclusive of the employee’s fringe ben-
efits and overhead costs. If the services
are in a different line of work, para-
graph (c)(1) of this section applies.

(d) Valuation of third party donated
supplies and loaned equipment or space.
(1) If a third party donates supplies,
the contribution will be valued at the
market value of the supplies at the
time of donation.

(2) If a third party donates the use of
equipment or space in a building but
retains title, the contribution will be
valued at the fair rental rate of the
equipment or space.

(e) Valuation of third party donated
equipment, buildings, and land. If a third
party donates equipment, buildings, or
land, and title passes to a grantee or
subgrantee, the treatment of the do-
nated property will depend upon the
purpose of the grant or subgrant, as
follows:

(1) Awards for capital expenditures. If
the purpose of the grant or subgrant is
to assist the grantee or subgrantee in
the acquisition of property, the market
value of that property at the time of
donation may be counted as cost shar-
ing or matching,

(2) Other awards. If assisting in the
acquisition of property is not the pur-
pose of the grant or subgrant, para-
graphs (e)(2) (i) and (ii) of this section
apply:

(i) If approval is obtained from the
awarding agency, the market value at
the time of donation of the donated
equipment or buildings and the fair
rental rate of the donated land may be
counted as cost sharing or matching.
In the case of a subgrant, the terms of
the grant agreement may require that
the approval be obtained from the Fed-
eral agency as well as the grantee. In
all cases, the approval may be given
only if a purchase of the equipment or
rental of the land would be approved as
an allowable direct cost. If any part of
the donated property was acquired
with Federal funds, only the non-fed-
eral share of the property may be
counted as cost-sharing or matching.

(ii) If approval is not obtained under
paragraph (e)(2)(i) of this section, no
amount may be counted for donated

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Department of Justice

land, and only depreciation or use al-
lowances may be counted for donated
equipment and buildings. The deprecia-
tion or use allowanves for this property
are not treated as third party in-kind
contributions, Instead, they are treat-
ed as costs incurred by the grantee or
subgrantee. They are computed and al-
located (usually as indirect costs) in
accordance with the cost principles
specified in §66.22, in the same way as
depreciation or use allowances for pur-
chased equipment and buildings. The
amount of depreciation or use allow-
ances for donated equipment and build-
ings is based on the property’s market
value at the time it was donated.

(f) Valuation of grantee or subgrantee
donated real property for construction/ac-
quisition. If a grantee or subgrantee do-
nates real property for a construction
or facilities acquisition project, the
current market value of that property
may be counted as cost sharing or
matching. If any part of the donated
property was acquired with Federal
funds, only the non-federal share of the
property may be counted as cost shar-
ing or matching.

(¢) Appraisal af real properly. In some
cases under paragraphs (d), (e) and (f)
of this section, it will be necessary to
establish the market value of land or a
building or the fair rental rate of land
or of space in a building. In these cases,
the Federal agency may require the
market value or fair rental value be set
by an independent appraiser, and that
the value or rate be certified by the
grantee. This requirement will also be
imposed by the grantee on subgrantees.

$66.25 Program income.

(a) General. Grantees are encouraged
to earn income to defray program
costs. Program income includes income
from fees for services performed, from
the use or rental of real or personal
property acquired with grant funds,
from the sale of commodities or items
fabricated under a grant agreement,
and from payments of principal and in-
terest on loans made with grant funds.
Except as otherwise provided in regula-
tions of the Federal agency, program
income does not include interest on
grant funds, rebates, credits, discounts,
refunds, etc. and interest earned on
any of them.

§ 66.25

(b) Definition of program income. Pro-
gram income means gross income re-
ceived by the grantee or subgrantee di-
rectly generated by a grant supported
activity, or earned only as a result of
the grant agreement during the grant
period. “During the grant period’’ is
the time between the effective date of
the award and the ending date of the
award reflected in the final financial
report.

(c) Cost of generating program income.
If authorized by Federal regulations or
the grant agreement, costs incident to
the generation of program income may
be deducted from gross income to de-
termine program income.

(a) Governmental revenues. Taxes, spe-
cial assessments, levies, fines, and
other such revenues raised by a grantee
or subgrantee are not program income
unless the revenues are specifically
identified in the grant agreement or
Federal agency regulations as program
income.

(e) Royalties. Income from royalties
and license fees for copyrighted mate-
rial, patents, and inventions developed
by a grantee or subgrantee is program
income only if the revenues are specifi-
cally identified in the grant agreement
or Federal agency regulations as pro-
gram income. (See §66.34.)

(f) Property. Proceeds from the sale of
real property or equipment will be han-
dled in accordance with the require-
ments of §§ 66.31 and 66.32.

(g) Use of program income. Program
income shall be deducted from outlays
which may be both Federal and non-
Federal as described below, unless the
Federal agency regulations or the
grant agreement specify another alter-
native (or a combination of the alter-
natives). In specifying alternatives, the
Federal agency may distinguish be-
tween income earned by the grantee
and income earned by subgrantees and
between the sources, kinds, or amounts
of income. When Federal agencies au-
thorize the alternatives in paragraphs
(g) (2) and (8) of this section, program
income in excess of any limits stipu-
lated shall also be deducted from out-
lays.

(1) Deduction. Ordinarily program in-
come shall be deducted from total al-
lowable costs to determine the net al-
lowable costs. Program income shall be

201

§ 66.26

used for current costs unless the Fed-
eral agency authorizes otherwise. Pro-
gram income which the grantee did not
anticipate at the time of the award
shall be used to reduce the Federal
agency and grantee contributions rath-
er than to increase the funds com-
mitted to the project.

(2) Addition. When authorized, pro-
gram income may be added to the
funds committed to the grant agree-
ment by the Federal agency and the
grantee. The program income shall be
used for the purposes and under the
conditions of the grant agreement.

(3) Cost sharing or matching. When au-
thorized, program income may be used
to meet the cost sharing or matching
requirement of the grant agreement.
The amount of the Federal grant award
remains the same.

(a) Income after the award period.
There are no Federal requirements gov-
erning the disposition of program in-
come earned after the end of the award
period (i.e., until the ending date of the
final financial report, see paragraph (a)
of this section), unless the terms of the
agreement or the Federal agency regu-
lations provide otherwise.

§66.26 Non-Federal audit.

(a) Basic rule. Grantees and sub-
grantees are responsible for obtaining
audits in accordance with the Single
Audit Act Amendments of 1996 (31
U.S.C. 7501-7507) and revised OMB Cir-
cular A-133, ‘Audits of States, Local
Governments, and Non-Profit Organi-
zations.”? The audits shall be made by
an independent auditor in accordance
with generally accepted government
auditing standards covering financial
audits.

(b) Subgrantees. State or local govern-
ments, as those terms are defined for
purposes of the Single Audit Act
Amendments of 1996, that provide Fed-
eral awards to a subgrantee, which ex-
pends $300,000 or more (or other
amount as specified by OMB) in Fed-
eral awards in a fiscal year, shall:

(1) Determine whether State or local
subgrantees have met the audit re-
quirements of the Act and whether sub-
grantees covered by OMB Circular A-
110, ‘Uniform Administrative Require-
ments for Grants and Agreements with
Institutions of Higher Education, Hos-

28 CFR Ch. | (7-1-10 Edition)

pitals, and Other Non-Profit Organiza-
tions,” have met the audit require-
ments of the Act. Commercial contrac-
tors (private for-profit and private and
governmental organizations) providing
goods and services to State and local
governments are not required to have a
single audit performed. State and local
governments should use their own pro-
cedures to ensure that the contractor
has complied with laws and regulations
affecting the expenditure of Federal
funds;

(2) Determine whether the sub-
grantee spent Federal assistance funds
provided in accordance with applicable
laws and regulations. This may be ac-
complished by reviewing an audit of
the subgrantee made in accordance
with the Act, Circular A-110, or
through other means (e.g., program re-
views) if the subgrantee has not had
such an audit;

(3) Ensure that appropriate correc-
tive action is taken within six months
after receipt of the audit report in in-
stance of noncompliance with Federal
laws and regulations;

(4) Consider whether subgrantee au-
dits necessitate adjustment of the
grantee’s own records; and

(5) Require each subgrantee to permit
independent auditors to have access to
the records and financial statements.

(c) Auditor selection. In arranging for
audit services, §66.36 shall be followed.

(Order No. 1252-88, 53 FR 8068 and 8087, Mar.
11, 1988, as amended at 62 FR 45939 and 45942,
Aug. 29, 1997]

CHANGES, PROPERTY, AND SUBAWARDS

$66.30 Changes.

(a) General. Grantees and subgrantees
are permitted to rebudget within the
approved direct cost budget to meet
unanticipated requirements and may
make limited program changes to the
approved project. However, unless
waived by the awarding agency, certain
types of post-award changes in budgets
and projects shall require the prior
written approval of the awarding agen-
cy.

(b) Relation to cost principles. The ap-
plicable cost principles (see § 66.22) con-
tain requirements for prior approval of
certain types of costs. Except where
waived, those requirements apply to all

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grants and subgrants even if para-
graphs (c) through (f) of this section do
not.

(c) Budget changes—(1) Nonconstruc-
tion projects. Except as stated in other
regulations or an award document,
grantees or subgrantees shall obtain
the prior approval of the awarding
agency whenever any of the following
changes is anticipated under a non-
construction award:

di) Any revision which would result
in the need for additional funding.

(ii) Unless waived by the awarding
agency, cumulative transfers among di-
rect cost categories, or, if applicable,
among separately budgeted programs,
projects, functions, or activities which
exceed or are expected to exceed ten
percent of the current total approved
budget, whenever the awarding agen-
cy’s share exceeds $100,000.

(iii) Transfer of funds allotted for
training allowances (i.e., from direct
payments to trainees to other expense
categories).

(2) Construction projects. Grantees and
subgrantees shall obtain prior written
approval for any budget revision which
would result in the need for additional
funds.

(3) Combined construction and non-
construction projects. When a grant or
subgrant provides funding for both con-
struction and nonconstruction activi-
ties, the grantee or subgrantee must
obtain prior written approval from the
awarding agency before making any
fund or budget transfer from non-
construction to construction or vice
versa,

(d) Programmatic changes. Grantees or
subgrantees must obtain the prior ap-
proval of the awarding agency when-
ever any of the following actions is an-
ticipated:

(1) Any revision of the scope or objec-
tives of the project (regardless of
whether there is an associated budget
revision requiring prior approval).

(2) Need to extend the period of avail-
ability of funds.

(8) Changes in key persons in cases
where specified in an application or a
erant award. In research projects, a
change in the project director or prin-
cipal investigator shall always require
approval unless waived by the award-
ing agency.

§ 66.31

(4) Under nonconstruction projects,
contracting out, subgranting (if au-
thorized by law) or otherwise obtaining
the services of a third party to perform
activities which are central to the pur-
poses of the award. This approval re-
quirement is in addition to the ap-
proval requirements of §66.36 but does
not apply to the procurement of equip-
ment, supplies, and general support
services.

(e) Additional prior approval require-
ments. The awarding agency may not
require prior approval for any budget
revision which is not described in para-
graph (c) of this section.

(f) Requesting prior approval. (1) A re-
quest for prior approval of any budget
revision will be in the same budget for-
mal the grantee used in its application
and shall be accompanied by a nar-
rative justification for the proposed re-
vision.

(2) A request for a prior approval
under the applicable Federal cost prin-
ciples (see §66.22) may be made by let-
ter.

(3) A request by a subgrantee for
prior approval will be addressed in
writing to the grantee. The grantee
will promptly review such request and
shall approve or disapprove the request
in writing. A grantee will not approve
any budget or project revision which is
inconsistent with the purpose or terms
and conditions of the Federal grant to
the grantee. If the revision, requested
by the subgrantee would result in a
change to the grantee’s approved
project which requires Federal prior
approval, the grantee will obtain the
Federal agency’s approval before ap-
proving the subgrantee’s request.

§66.31 Real property.

(a) Title. Subject to the obligations
and conditions set forth in this section,
title to real property acquired under a
grant or subgrant will vest upon acqui-
sition in the grantee or subgrantee re-
spectively.

(b) Use. Except as otherwise provided
by Federal statutes, real property will
be used for the originally authorized
purposes as long as needed for that pur-
poses, and the grantee or subgrantee
shall not dispose of or encumber its
title or other interests.

203

§ 66.32

(c) Disposition. When real property is
no longer needed for the originally au-
thorized purpose, the grantee or sub-
grantee will request disposition in-
structions from the awarding agency.
The instructions will provide for one of
the following alternatives:

(1) Retention of title. Retain title after
compensating the awarding agency.
The amount paid to the awarding agen-
cy will be computed by applying the
awarding agency’s percentage of par-
ticipation in the cost of the original
purchase to the fair market value of
the property. However, in those situa-
tions where a grantee or subgrantee is
disposing of real property acquired
with grant funds and acquiring replace-
ment real property under the same pro-
gram, the net proceeds from the dis-
position may be used as an offset to the
cost of the replacement property.

(2) Sale of property. Sell the property
and compensate the awarding agency.
The amount due to the awarding agen-
cy will be calculated by applying the
awarding agency’s percentage of par-
ticipation in the cost of the original
purchase to the proceeds of the sale
after deduction of any actual and rea-
sonable selling and fixing-up expenses.
If the grant is still active, the net pro-
ceeds from sale may be offset against
the original cost of the property. When
a grantee or subgrantee is directed to
sell property, sales procedures shal] be
followed that provide for competition
to the extent practicable and result in
the highest possible return.

(3) Transfer of title. Transfer title to
the awarding agency or to a third-
party designatedapproved by the
awarding agency. The grantee or sub-
grantee shall be paid an amount cal-
culated by applying the grantee or sub-
grantee’s percentage of participation
in the purchase of the real property to
the current fair market value of the
property.

$66.32 Equipment.

(a) The Omnibus Crime Control and
Safe Streets Act of 1968, as amended,
Public Law 90-351, section 808, requires
that the title to all equipment and sup-
plies purchased with section 403 or 1302
(block or formula funds) shall vest in
the criminal justice agency or non-
profit organization that purchased the

28 CFR Ch. | (7-1-10 Edition)

property if it certifies to the State of-
fice described in section 408 or 1308 that
it will use the property for criminal
justice purposes. If such certification is
not made, title to the property shall
vest in the State office, which shall
seek to have the property used for
criminal justice purposes elsewhere in
the State prior to using it or disposing
of it in any other manner.

(bo) States. A State will use, manage,
and dispose of equipment acquired
under a grant by the State in accord-
ance with State laws and procedures.
Other grantees and subgrantees will
follow paragraphs (c) through (e) of
this section.

(c) Use. (1) Equipment shall be used
by the grantee or subgrantee in the
program or project for which it was ac-
quired as long as needed, whether or
not the project or program continues
to be supported by Federal funds. When
no longer needed for the original pro-
gram or project, the equipment may be
used in other activities currently or
previously supported by a Federal
agency.

(2) The grantee or subgrantee shall
also make equipment available for use
on other projects or programs cur-
rently or previously supported by the
Federal Government, providing such
use will not interfere with the work on
the projects or program for which it
was originally acquired. First pref-
erence for other use shall be given to
other programs or projects supported
by the awarding agency. User fees
should be considered if appropriate.

(3) Notwithstanding the encourage-
ment in §66.25(a) to earn program in-
come, the grantee or subgrantee must
not use equipment acquired with grant
funds to provide services for a fee to
compete unfairly with private compa-
nies that provide equivalent services,
unless specifically permitted or con-
templated by Federal statute.

(4) When acquiring replacement
equipment, the grantee or subgrantee
may use the equipment to be replaced
as a trade-in or sell the property and
use the proceeds to offset the cost of
the replacement property, subject to
the approval of the awarding agency.

(d) Management requirements. Proce-
dures for managing equipment (includ-
ing replacement equipment), whether

204

Deparment of Justice

acquired in whole or in part with grant
funds, unti] disposition takes place
will, as a minimum, meet the following
requirements:

(1) Property records must be main-
tained that include a description of the
property, a serial number or other
identification number, the source of
property, who holds title, the acquisi-
tion date, and cost of the property, per-
centage of Federal participation in the
cost of the property, the location, use
and condition of the property, and any
ultimate disposition data including the
date of disposal and sale price of the
property.

(2) A physical inventory of the prop-
erty must be taken and the results rec-
onciled with the property records at
least once every two years.

(3) A control system must be devel-
oped to ensure adequate safeguards to
prevent loss, damage, or theft of the
property. Any loss, damage, or theft
shall be investigated.

(4) Adequate maintenance procedures
must be developed to keep the property
in good condition.

(5) If the grantee or subgrantee is au-
thorized or required to sell the prop-
erty, proper sales procedures must be
established to ensure the highest pos-
sible return.

(e) Disposition. When original or re-
placement equipment acquired under a
grant or subgrant is no longer needed
for the original project or program or
for other activities currently or pre-
viously supported by a Federal agency,
disposition of the equipment will be
made as follows:

(1) Items of equipment with a current
per-unit fair market value of less than
$5,000 may be retained, sold or other-
wise disposed of with no further obliga-
tion to the awarding agency.

(2) Items of equipment with a current
per unit fair market value in excess of
$5,000 may be retained or sold and the
awarding agency shall have a right to
an amount calculated by multiplying
the current market value or proceeds
from sale by the awarding agency’s
share of the equipment.

(3) In cases where a grantee or sub-
grantee fails to take appropriate dis-
position actions, the awarding agency
may direct the grantee or subgrantee
to take excess and disposition actions.

§ 66.33

(f) Federal equipment. In the event a
grantee or subgrantee is provided fed-
erally-owned equipment:

(1) Title will remain vested in the
Federal Government.

(2) Grantees or subgrantees will man-
age the equipment in accordance with
Federal agency rules and procedures,
and submit an annual] inventory list-
ing,

(3) When the equipment is no longer
needed, the grantee or subgrantee will
request disposition instructions from
the Federal agency.

(g) Right to transfer title. The Federal
awarding agency may reserve the right
to transfer title to the Federal Govern-
ment or a third part named by the
awarding agency when such a third
party is otherwise eligible under exist-
ing statutes. Such transfers shall be
subject to the following standards:

(1) The property shall be identified in
the grant or otherwise made known to
the grantee in writing.

(2) The Federal awarding agency
shall issue disposition instruction
within 120 calendar days after the end
of the Federal support of the project
for which it was acquired. If the Fed-
eral awarding agency fails to issue dis-
position instructions within the 120
calendar-day period the grantee shall
follow 66.32(e).

(3) When title to equipment is trans-
ferred, the grantee shall be paid an
amount calculated by applying the per-
centage of participation in the pur-
chase to the current fair market value
of the property.

(53 FR 8068 and 8087, Mar. 11, 1988, as amend-
ed by Order No. 1252-88, 53 FR 8068. Mar. 11,
1988; 53 FR 12099, Apr. 12, 1988)

$66.33 Supplies.

(a) The Omnibus Crime Control and
Safe Streets Act of 1968, as amended,
Public Law 90-351, section 808, requires
that the title to all equipment and sup-
plies purchased with section 408 or 1302
(block or formula funds) shall vest in
the criminal justice agency or non-
profit organization that purchased the
property if it certifies to the State of-
fice described in section 408 or 1308 that
it will use the property for criminal
justice purposes. If such certification is
not made, title to the property shall
vest in the State office, which shall

205

§ 66.34

seek to have the property used for
criminal justice purposes elsewhere in
the State prior to using it or disposing
of it in any other manner.

(b) Disposition. If there is a residual
inventory of unused supplies exceeding
$5,000 in total aggregate fair market
value upon termination or completion
of the award, and if the supplies are
not needed for any other federally
sponsored programs or projects, the
grantee or subgrantee shall com-
pensate the awarding agency for its
share.

[53 FR 8068 and 8087, Mar. 11, 1988, as amend-
ed by Order No. 1252-88, 53 FR 8069, Mar. 11,
1988]

$66.34 Copyrights.

The Federal awarding agency re-
serves a royalty-free, nonexclusive, and
irrevocable license to reproduce, pub-
lish or otherwise use, and to authorize
others to use, for Federal] Government
purposes:

(a) The copyright in any work devel-
oped under a grant, subgrant, or con-
tract under a grant or subgrant; and

(b) Any rights of copyright to which
a grantee, subgrantee or a contractor
purchases ownership with grant sup-
port.

$66.35 Subawards to debarred and
suspended parties.

Grantees and subgrantees must not
make any award or permit any award
(subgrant or contract) at any tier to
any party which is debarred or sus-
pended or is otherwise excluded from or
ineligible for participation in Federal
assistance programs under Executive
Order 12549, ‘‘Debarment and Suspen-
sion.”

$66.36 Procurement.

(a) States. When procuring property
and services under a grant, a State will
follow the same policies and procedures
it uses for procurements from its non-
Federal funds. The State will ensure
that every purchase order or other con-
tract includes any clauses required by
Federal statutes and executive orders
and their implementing regulations.
Other grantees and subgrantees will
follow paragraphs (b) through (i) in
this section.

28 CFR Ch. | (7-1-10 Edition)

(b) Procurement standards. (1) Grant-
ees and subgrantees will use their own
procurement procedures which reflect
applicable State and local laws and
regulations, provided that the procure-
ments conform to applicable Federal
law and the standards identified in this
section.

(2) Grantees and subgrantees will
maintain a contract administration
system which ensures that contractors
perform in accordance with the terms,
conditions, and specifications of their
contracts or purchase orders.

(3) Grantees and subgrantees will
maintain a written code of standards of
conduct governing the performance of
their employees engaged in the award
and administration of contracts. No
employee, officer or agent of the grant-
ee or subgrantee shall participate in se-
lection, or in the award or administra-
tion of a contract supported by Federal
funds if a conflict of interest, real or
apparent, would be involved. Such a
conflict would arise when:

(i) The employee, officer or agent,

(ii) Any member of his immediate
family,

(ili) His or her partner, or

(iv) An organization which employs,
or is about to employ, any of the
above, has a financial or other interest
in the firm selected for award. The
grantee’s or subgrantee’s officers, em-
ployees or agents will neither solicit
nor accept gratuities, favors or any-
thing of monetary value from contrac-
tors, potential contractors, or parties
to subagreements. Grantee and sub-
grantees may set minimum rules where
the financial interest is not substantial
or the gift is an unsolicited item of
nominal intrinsic value. To the extent
permitted by State or local law or reg-
ulations, such standards or conduct
will provide for penalties, sanctions, or
other disciplinary actions for viola-
tions of such standards by the grant-
ee’s and subgrantee’s officers, employ-
ees, or agents, or by contractors or
their agents. The awarding agency may
in regulation provide additional prohi-
bitions relative to real, apparent, or
potential conflicts of interest.

(4) Grantee and subgrantee proce-
dures will provide for a review of pro-
posed procurements to avoid purchase
of unnecessary or duplicative items.

206

Department of Justice

Consideration should be given to con-
solidating or breaking out procure-
ments to obtain a more economical
purchase. Where appropriate, an anal-
ysis will be made of lease versus pur-
chase alternatives, and any other ap-
propriate analysis to determine the
most economical approach.

(5) To foster greater economy and ef-
ficiency, grantees and subgrantees are
encouraged to enter into State and
local intergovernmental agreements
for procurement or use of common
goods and services.

(6) Grantees and suhgrantees are en-
couraged to use Federal excess and sur-
plus property in lieu of purchasing new
equipment and property whenever such
use is feasible and reduces project
costs.

(7) Grantees and subgrantees are en-
couraged to use value engineering
clauses in contracts for construction
projects of sufficient size to offer rea-
sonable opportunities for cost reduc-
tions. Value engineering is a system-
atic and creative anaylsis of each con-
tract item or task to ensure that its es-
sential function is provided at the
overall lower cost.

(8) Grantees and subgrantees will
make awards only to responsible con-
tractors possessing the ability to per-
form successfully under the terms and
conditions of a proposed procurement.
Consideration will be given to such
matters as contractor integrity, com-
pliance with public policy, record of
past performance, and financial and
technical resources.

(9) Grantees and subgrantees will
maintain records sufficient to detail
the significant history of a procure-
ment. These records will include, but
are not necessarily Hmited to the fol-
lowing: rationale for the method of
procurement, selection of contract
type, contractor selection or rejection,
and the basis for the contract price.

(10) Grantees and subgrantees will
use time and material type contracts
only—

Gi) After a determination that no
other contract is suitable. and

(il) If the contract includes a ceiling
price that the contractor exceeds at its
own risk.

(11) Grantees and subgrantees alone
will be responsible, in accordance with

§ 66.36

good administrative practice and sound
business judgment, for the settlement
of all contractual and administrative
issues arising out of procurements.
These issues include, but are not lim-
ited to source evaluation, protests, dis-
putes, and claims. These standards do
not relieve the grantee or subgrantee
of any contractual responsibilities
under its contracts. Federal agencies
will not substitute their judgment for
that of the grantee or subgrantee un-
less the matter is primarily a Federal
concern. Violations of law will be re-
ferred to the local, State, or Federal
authority having proper jurisdiction.

(12) Grantees and subgrantees will
have protest procedures to handle and
resolve disputes relating to their pro-
curements and shall in all instances
disclose information regarding the pro-
test to the awarding agency. A
protestor must exhaust all administra-
tive remedies with the grantee and sub-
grantee before pursuing a protest with
the Federal agency. Reviews of pro-
tests by the Federal agency will be lim-
ited to:

(i) Violations of Federal law or regu-
lations and the standards of this sec-
tion (violations of State or local law
will be under the jurisdiction of State
or local authorities) and

(il) Violations of the grantee’s or sub-
grantee’s protest procedures for failure
to review a complaint or protest. Pro-
tests received by the Federal agency
other than those specified above will be
referred to the grantee or subgrantee.

(c) Competition. (1) All procurement
transactions will be conducted in a
manner providing full and open com-
petition consistent with the standards
of §66.36. Some of the situations con-
sidered to be restrictive of competition
include but are not limited to:

(i) Placing unreasonable require-
ments on firms in order for them to
qualify to do business,

(i1) Requiring unnecessary experience
and excessive bonding,

(ili) Noncompetitive pricing practices
between firms or between affiliated
companies,

(iv) Noncompetitive awards to con-
sultants that are on retainer contracts,

(v) Organizational conflicts of inter-
est,

207