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Notes

32 C.F.R. §§ 34.11–34.17

7 sections in range

§34.11. Standards for financial management systems.

32 C.F.R. § 34.11

(a)
Recipients shall be allowed and encouraged to use existing financial management systems established for doing business in the commercial marketplace, to the extent that the systems comply with Generally Accepted Accounting Principles (GAAP) and the minimum standards in this section. As a minimum, a recipient's financial management system shall provide:
(1)
Effective control of all funds. Control systems must be adequate to ensure that costs charged to Federal funds and those counted as the recipient's cost share or match are consistent with requirements for cost reasonableness, allowability, and allocability in the applicable cost principles (see § 34.17) and in the terms and conditions of the award.
(2)
Accurate, current and complete records that document for each project funded wholly or in part with Federal funds the source and application of the Federal funds and the recipient's required cost share or match. These records shall:
(i)
Contain information about receipts, authorizations, assets, expenditures, program income, and interest.
(ii)
Be adequate to make comparisons of outlays with budgeted amounts for each award (as required for programmatic and financial reporting under § 34.41. Where appropriate, financial information should be related to performance and unit cost data. Note that unit cost data are generally not appropriate for awards that support research.
(3)
To the extent that advance payments are authorized under § 34.12, procedures that minimize the time elapsing between the transfer of funds to the recipient from the Government and the recipient's disbursement of the funds for program purposes.
(4)
The recipient shall have a system to support charges to Federal awards for salaries and wages, whether treated as direct or indirect costs. Where employees work on multiple activities or cost objectives, a distribution of their salaries and wages will be supported by personnel activity reports which must:
(i)
Reflect an after the fact distribution of the actual activity of each employee.
(ii)
Account for the total activity for which each employee is compensated.
(iii)
Be prepared at least monthly, and coincide with one or more pay periods.
(b)
Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the DoD Component, at its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the recipient are not deemed adequate to protect the interest of the Federal Government.
(c)
The DoD Component may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest.
(d)
Where bonds are required in the situations described above, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223, “Surety Companies Doing Business with the United States.”
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

§34.12. Payment.

32 C.F.R. § 34.12

(a)
Methods available. Payment methods for awards with for-profit organizations are:
(1)
Reimbursement. Under this method, the recipient requests reimbursement for costs incurred during a time period. In cases where the recipient submits each request for payment to the grants officer, the DoD payment office reimburses the recipient by electronic funds transfer or check after approval of the request by the grants officer designated to do so.
(2)
Advance payments. Under this method, a DoD Component makes a payment to a recipient based upon projections of the recipient's cash needs. The payment generally is made upon the recipient's request, although predetermined payment schedules may be used when the timing of the recipient's needs to disburse funds can be predicted in advance with sufficient accuracy to ensure compliance with paragraph (b)(2)(iii) of this section.
(b)
Selecting a method.
(1)
The preferred payment method is the reimbursement method, as described in paragraph (a)(1) of this section
(2)
Advance payments, as described in paragraph (a)(2) of this section, may be used in exceptional circumstances, subject to the following conditions:
(i)
The grants officer, in consultation with the program official, must judge that advance payments are necessary or will materially contribute to the probability of success of the project contemplated under the award (e.g., as startup funds for a project performed by a newly formed company). The rationale for the judgment shall be documented in the award file.
(ii)
Cash advances shall be limited to the minimum amounts needed to carry out the program.
(iii)
Recipients and the DoD Component shall maintain procedures to ensure that the timing of cash advances is as close as is administratively feasible to the recipients' disbursements of the funds for program purposes, including direct program or project costs and the proportionate share of any allowable indirect costs.
(iv)
Recipients shall maintain advance payments of Federal funds in interest-bearing accounts, and remit annually the interest earned to the administrative grants officer responsible for post-award administration (the grants officer shall forward the payment to the responsible payment office, for return to the Department of Treasury's miscellaneous receipts account), unless one of the following applies:
(A)
The recipient receives less than $120,000 in Federal awards per year.
(B)
The best reasonably available interest bearing account would not be expected to earn interest in excess of $250 per year on Federal cash balances.
(C)
The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.
(c)
Frequency of payments. For either reimbursements or advance payments, recipients shall be authorized to submit requests for payment at least monthly.
(d)
Forms for requesting payment. DoD Components may authorize recipients to use the SF-270, 1 “Request for Advance or Reimbursement;” the SF-271, 2 “Outlay Report and Request for Reimbursement for Construction Programs;” or prescribe other forms or formats as necessary.
(e)
Timeliness of payments. Payments normally will be made within 30 calendar days of the receipt of a recipient's request for reimbursement or advance by the office designated to receive the request (for further information about timeframes for payments, see 32 CFR 22.810(c)(3)(ii)).
(f)
Precedence of other available funds. Recipients shall disburse funds available from program income, rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments.
(g)
Withholding of payments. Unless otherwise required by statute, grants officers shall not withhold payments for proper charges made by recipients during the project period for reasons other than the following:
(1)
A recipient has failed to comply with project objectives, the terms and conditions of the award, or Federal reporting requirements, in which case the grants officer may suspend payments in accordance with § 34.52.
(2)
The recipient is delinquent on a debt to the United States (see definitions of “debt” and “delinquent debt” in 32 CFR 22.105). In that case, the grants officer may, upon reasonable notice, withhold payments for obligations incurred after a specified date, until the debt is resolved.
Notes, amendments, and revision history

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]

§34.13. Cost sharing or matching.

32 C.F.R. § 34.13

(a)
Acceptable contributions. All contributions, including cash contributions and third party in-kind contributions, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria:
(1)
They are verifiable from the recipient's records.
(2)
They are not included as contributions for any other federally-assisted project or program.
(3)
They are necessary and reasonable for proper and efficient accomplishment of project or program objectives.
(4)
They are allowable under § 34.17.
(5)
They are not paid by the Federal Government under another award, except—
(i)
Costs that are authorized by Federal statute to be used for cost sharing or matching; or
(ii)
Independent research and development (IR&D) costs. In accordance with the for-profit cost principle in 48 CFR 31.205-18(e), use of IR&D as cost sharing is permitted, whether or not the Government decides at a later date to reimburse any of the IR&D as allowable indirect costs. In such cases, the IR&D must meet all of the criteria in paragraphs (a) (1) through (4) and (a) (6) through (8) of this section.
(6)
They are provided for in the approved budget, when approval of the budget is required by the DoD Component.
(7)
If they are real property or equipment, whether purchased with recipient's funds or donated by third parties, they must have the grants officer's prior approval if the contributions' value is to exceed depreciation or use charges during the project period (paragraphs (b)(1) and (b)(4)(ii) of this section discuss the limited circumstances under which a grants officer may approve higher values). If a DoD Component requires approval of a recipient's budget (see paragraph (a)(6) of this section), the grants officer's approval of the budget satisfies this prior approval requirement, for real property or equipment items listed in the budget.
(8)
They conform to other provisions of this part, as applicable.
(b)
Valuing and documenting contributions—
(1)
Valuing recipient's property or services of recipient's employees. Values shall be established in accordance with the applicable cost principles in § 34.17, which means that amounts chargeable to the project are determined on the basis of costs incurred. For real property or equipment used on the project, the cost principles authorize depreciation or use charges. The full value of the item may be applied when the item will be consumed in the performance of the award or fully depreciated by the end of the award. In cases where the full value of a donated capital asset is to be applied as cost sharing or matching, that full value shall be the lesser of the following:
(i)
The certified value of the remaining life of the property recorded in the recipient's accounting records at the time of donation; or
(ii)
The current fair market value. However, when there is sufficient justification, the grants officer may approve the use of the current fair market value of the donated property, even if it exceeds the certified value at the time of donation to the project. The grants officer may accept the use of any reasonable basis for determining the fair market value of the property.
(2)
Valuing services of others' employees. When an employer other than the recipient furnishes the services of an employee, those services shall be valued at the employee's regular rate of pay plus an amount of fringe benefits and overhead (at an overhead rate appropriate for the location where the services are performed) provided these services are in the same skill for which the employee is normally paid.
(3)
Valuing volunteer services. Volunteer services furnished by professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for volunteer services shall be consistent with those paid for similar work in the recipient's organization. In those instances in which the required skills are not found in the recipient organization, rates shall be consistent with those paid for similar work in the labor market in which the recipient competes for the kind of services involved. In either case, paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation.
(4)
Valuing property donated by third parties.
(i)
Donated supplies may include such items as office supplies or laboratory supplies. Value assessed to donated supplies included in the cost sharing or matching share shall be reasonable and shall not exceed the fair market value of the property at the time of the donation.
(ii)
Normally only depreciation or use charges for equipment and buildings may be applied. However, the fair rental charges for land and the full value of equipment or other capital assets may be allowed, when they will be consumed in the performance of the award or fully depreciated by the end of the award, provided that the grants officer has approved the charges. When use charges are applied, values shall be determined in accordance with the usual accounting policies of the recipient, with the following qualifications:
(A)
The value of donated space shall not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality.
(B)
The value of loaned equipment shall not exceed its fair rental value.
(5)
Documentation. The following requirements pertain to the recipient's supporting records for in-kind contributions from third parties:
(i)
Volunteer services shall be documented and, to the extent feasible, supported by the same methods used by the recipient for its own employees.
(ii)
The basis for determining the valuation for personal services and property shall be documented.
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

§34.14. Program income.

32 C.F.R. § 34.14

(a)
DoD Components shall apply the standards in this section to the disposition of program income from projects financed in whole or in part with Federal funds.
(b)
Recipients shall have no obligation to the Government, unless the terms and conditions of the award provide otherwise, for program income earned:
(1)
From license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under an award. Note, however, that the Patent and Trademark Amendments (35 U.S.C. Chapter 18), as implemented in § 34.25, apply to inventions made under a research award.
(2)
After the end of the project period. If a grants officer anticipates that an award is likely to generate program income after the end of the project period, the grants officer should indicate in the award document whether the recipient will have any obligation to the Federal Government with respect to such income.
(c)
If authorized by the terms and conditions of the award, costs incident to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the award.
(d)
Other than any program income excluded pursuant to paragraphs (b) and (c) of this section, program income earned during the project period shall be retained by the recipient and used in one or more of the following ways, as specified in program regulations or the terms and conditions of the award:
(1)
Added to funds committed to the project by the DoD Component and recipient and used to further eligible project or program objectives.
(2)
Used to finance the non-Federal share of the project or program.
(3)
Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based.
(e)
If the terms and conditions of an award authorize the disposition of program income as described in paragraph (d)(1) or (d)(2) of this section, and stipulate a limit on the amounts that may be used in those ways, program income in excess of the stipulated limits shall be used in accordance with paragraph (d)(3) of this section.
(f)
In the event that the terms and conditions of the award do not specify how program income is to be used, paragraph (d)(3) of this section shall apply automatically to all projects or programs except research. For awards that support research, paragraph (d)(1) of this section shall apply automatically unless the terms and conditions specify another alternative or the recipient is subject to special award conditions, as indicated in § 34.4.
(g)
Proceeds from the sale of property that is acquired, rather than fabricated, under an award are not program income and shall be handled in accordance with the requirements of the Property Standards (see §§ 34.20 through 34.25).
Notes, amendments, and revision history

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

§34.15. Revision of budget and program plans.

32 C.F.R. § 34.15

(a)
The budget plan is the financial expression of the project or program as approved during the award process. It may include either the sum of the Federal and non-Federal shares, or only the Federal share, depending upon DoD Component requirements. It shall be related to performance for program evaluation purposes whenever appropriate.
(b)
Recipients are required to report deviations from budget and program plans, and request prior approvals for budget and program plan revisions, in accordance with this section.
(c)
Recipients shall immediately request, in writing, prior approval from the cognizant grants officer when there is reason to believe that within the next seven calendar days a programmatic or budgetary revision will be necessary for certain reasons, as follows:
(1)
The recipient always must obtain the grants officer's prior approval when a revision is necessary for either of the following two reasons (i.e., these two requirements for prior approval may never be waived):
(i)
A change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval).
(ii)
A need for additional Federal funding.
(2)
The recipient must obtain the grants officer's prior approval when a revision is necessary for any of the following six reasons, unless the requirement for prior approval is waived in the terms and conditions of the award (i.e., if the award document is silent, these prior approvals are required):
(i)
A change in a key person specified in the application or award document.
(ii)
The absence for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator.
(iii)
The inclusion of any additional costs that require prior approval in accordance with applicable cost principles for Federal funds and recipients' cost share or match, in § 34.17 and § 34.13, respectively.
(iv)
The inclusion of pre-award costs. All such costs are incurred at the recipient's risk (i.e., the DoD Component is under no obligation to reimburse such costs if for any reason the recipient does not receive an award, or if the award is less than anticipated and inadequate to cover such costs).
(v)
A “no-cost” extension of the project period that does not require additional Federal funds and does not change the approved objectives or scope of the project.
(vi)
Any subaward, transfer or contracting out of substantive program performance under an award, unless described in the application and funded in the approved awards. This provision does not apply to the purchase of supplies, material, or general support services, except that procurement of equipment or other capital items of property always is subject to the grants officer's prior approval under § 34.21(a), if it is to be purchased with Federal funds, or § 34.13(a)(7), if it is to be used as cost sharing or matching.
(3)
The recipient also must obtain the grants officer's prior approval when a revision is necessary for either of the following reasons, if specifically required in the terms and conditions of the award document (i.e., if the award document is silent, these prior approvals are not required):
(i)
The transfer of funds among direct cost categories, functions and activities for awards in which the Federal share of the project exceeds the simplified acquisition threshold and the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the DoD Component. No DoD Component shall permit a transfer that would cause any Federal appropriation or part thereof to be used for purposes other than those consistent with the original intent of the appropriation.
(ii)
For awards that provide support for both construction and nonconstruction work, any fund or budget transfers between the two types of work supported.
(d)
Within 30 calendar days from the date of receipt of the recipient's request for budget revisions, the grants officer shall review the request and notify the recipient whether the budget revisions have been approved. If the revision is still under consideration at the end of 30 calendar days, the grants officer shall inform the recipient in writing of the date when the recipient may expect the decision.
Notes, amendments, and revision history

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]

§34.16. Audits.

32 C.F.R. § 34.16

(a)
Any recipient that expends $750,000 or more in a year under Federal awards shall have an audit made for that year by an independent auditor, in accordance with paragraph (b) of this section. The audit generally should be made a part of the regularly scheduled, annual audit of the recipient's financial statements. However, it may be more economical in some cases to have the Federal awards separately audited, and a recipient may elect to do so, unless that option is precluded by award terms and conditions, or by Federal laws or regulations applicable to the program(s) under which the awards were made.
(b)
The auditor shall determine and report on whether:
(1)
The recipient has an internal control structure that provides reasonable assurance that it is managing Federal awards in compliance with Federal laws and regulations, and with the terms and conditions of the awards.
(2)
Based on a sampling of Federal award expenditures, the recipient has complied with laws, regulations, and award terms that may have a direct and material effect on Federal awards.
(c)
The recipient shall make the auditor's report available to DoD Components whose awards are affected.
(d)
The requirement for an annual independent audit is intended to ascertain the adequacy of the recipient's internal financial management systems and to curtail the unnecessary duplication and overlap that usually results when Federal agencies request audits of individual awards on a routine basis. Therefore, a grants officer:
(1)
Shall consider whether the independent audit satisfies his or her requirements, before requesting any additional audits; and
(2)
When requesting an additional audit, shall—
(i)
Limit the scope of such additional audit to areas not adequately addressed by the independent audit.
(ii)
Coordinate the audit request with the Federal agency with the predominant fiscal interest in the recipient, as the agency responsible for the scheduling and distribution of audits. If DoD has the predominant fiscal interest in the recipient, the Defense Contract Management Agency (DCMA) is responsible for monitoring audits, ensuring resolution of audit findings, and distributing audit reports. When an additional audit is requested and DoD has the predominant fiscal interest in the recipient, DCMA shall, to the extent practicable, ensure that the additional audit builds upon the independent audit or other audits performed in accordance with this section.
(e)
There may be instances in which Federal auditors have recently performed audits, are performing audits, or are planning to perform audits, of a recipient. In these cases, the recipient and its Federal cognizant agency should seek to have the non-Federal, independent auditors work with the Federal auditors to develop a coordinated audit approach, to minimize duplication of audit work.
(f)
Audit costs (including a reasonable allocation of the costs of the audit of the recipient's financial statement, based on the relative benefit to the Government and the recipient) are allowable costs of DoD awards.
Notes, amendments, and revision history

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005; 85 FR 51244, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 70 FR 49477, Aug. 23, 2005; 85 FR 51244, Aug. 19, 2020]

§34.17. Allowable costs.

32 C.F.R. § 34.17

Allowability of costs shall be determined in accordance with the cost principles applicable to the type of entity incurring the costs, as follows:
(a)
For-profit organizations. Allowability of costs incurred by for-profit organizations that are recipients of prime awards from DoD Components, and those that are subrecipients under prime awards to other organizations, is to be determined in accordance with:
(1)
The for-profit cost principles in 48 CFR parts 31 and 231 (in the Federal Acquisition Regulation, or FAR, and the Defense Federal Acquisition Regulation Supplement, or DFARS, respectively).
(2)
The supplemental information on allowability of audit costs, in § 34.16(f).
(b)
Other types of organizations. Allowability of costs incurred by other types of organizations that may be subrecipients under a prime award to a for-profit organization is determined as follows:
(1)
Institutions of higher education, nonprofit organizations, States, local governments, and Indian tribes. Allowability is determined in accordance with the cost principles in subpart E of OMB guidance in 2 CFR part 200. Note that 2 CFR 200.401(c) provides that a nonprofit organization listed in appendix VIII to 2 CFR part 200 is subject to the FAR and DFARS cost principles specified in paragraph (a)(1) of this section for for-profit organizations.
(2)
Hospitals. Allowability is determined in accordance with the cost principles identified in appendix IX to 2 CFR part 200 (currently 45 CFR part 75).
Notes, amendments, and revision history

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]

Authority

Authority: 5 U.S.C. 301 and 10 U.S.C. 113.

Source

Source: 63 FR 12204, Mar. 12, 1998, unless otherwise noted.

Amendments

[63 FR 12204, Mar. 12, 1998, as amended at 85 FR 51244, Aug. 19, 2020]