FR Doc E7-10036
[Federal Register: May 24, 2007 (Volume 72, Number 100)]
[Proposed Rules]
[Page 29097-29100]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my07-16]
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DEPARTMENT OF EDUCATION
34 CFR Part 75
[Docket ID ED-2007-OCFO-0132]
RIN 1890-AA15
Direct Grant Programs
AGENCY: Office of the Chief Financial Officer, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes to amend the regulations in 34 CFR part
75, regarding the determination and recovery of indirect costs by
grantees. The proposed amendments would address procedural aspects
related to the establishment of temporary indirect cost rates, specify
the temporary rate that would apply to grants generally, and clarify
how indirect costs are determined for a group of applicants that apply
for a single training grant.
DATES: We must receive your comments on or before June 25, 2007.
ADDRESSES: Submit your comments through the Federal eRulemaking Portal
or via postal mail, commercial delivery, or hand delivery. We will not
accept comments by fax or by e-mail. Please submit your comments only
one time, in order to ensure that we do not receive duplicate copies.
In addition, please include the Docket ID at the top of your comments.
Federal eRulemaking Portal: Go to http://www.regulations.gov
, select ``Department of Education'' from the agency
drop-down menu, then click ``Submit.'' In the Docket ID column, select
ED-2007-OCFO-0132 to add or view public comments and to view supporting
and related materials available electronically. Information on using
Regulations.gov, including instructions for submitting comments,
accessing documents, and viewing the docket after the close of the
comment period, is available through the site's ``User Tips'' link.
Postal Mail, Commercial Delivery, or Hand Delivery. If you
mail or deliver your comments about these proposed regulations, address
them to Richard Mueller, U.S. Department of Education, 830 First
Street, NE., room 21C7, Washington, DC 20202-4450.
Privacy Note: The Department's policy for comments received from
members of the public (including those comments submitted by mail,
commercial delivery, or hand delivery) is to make these submissions
available for public viewing on the Federal eRulemaking Portal at
http://www.regulations.gov. All submissions will be posted to the
Federal eRulemaking Portal without change, including personal
identifiers and contact information.
FOR FURTHER INFORMATION CONTACT: Richard Mueller. Telephone: (202) 377-
3838 or via Internet: Richard.Mueller@ed.gov.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Relay Service (FRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed under FOR FURTHER
INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
We invite you to submit comments regarding these proposed
regulations. To ensure that your comments have maximum effect in
developing the final regulations, we urge you to identify clearly the
specific section or sections of the proposed regulations that each of
[[Page 29098]]
your comments addresses and to arrange your comments in the same order
as the proposed regulations.
We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
provide to reduce the potential costs or increase potential benefits
while preserving the effective and efficient administration of the
Department's Direct Grant programs.
During and after the comment period, you may inspect all public
comments about these proposed regulations by accessing Regulations.gov.
You may also inspect the comments, in person, in room 21C7, 830 First
Street, NE., Washington, DC, between the hours of 8:30 a.m. and 4 p.m.,
Eastern Time, Monday through Friday of each week except Federal
holidays.
Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record
On request, we will supply an appropriate aid to an individual with
a disability who needs assistance to review the comments or other
documents in the public rulemaking record for these proposed
regulations. If you want to schedule an appointment for this type of
aid, please contact the person listed under FOR FURTHER INFORMATION
CONTACT.
Background
Changes to Indirect Cost Policy
The Secretary proposes amendments to improve the Department's
ability under 34 CFR 75.560 to provide a temporary indirect cost rate.
The temporary rate for a grantee that does not have a federally
recognized indirect cost rate at the time the Department awards its
first grant to the grantee would be ten percent of the direct salaries
and wages of the project. These changes would permit the use of a
temporary indirect cost rate under the grant award for the first ninety
days after the date the Department issues the Grant Award Notification.
A grantee may continue to charge indirect costs at the temporary rate
after the first ninety days if the grantee submits a formal indirect
cost proposal to its cognizant agency within those ninety days. If,
after the ninety-day period, a grantee has not submitted an indirect
cost proposal to its cognizant agency, it must stop using the temporary
rate. After that period, the grantee would not be allowed to charge any
indirect costs to its grant until it obtained a federally recognized
indirect cost rate from its cognizant agency.
These regulations are needed to make the Department's practice
consistent with the practice of other Federal agencies and reduce the
number of improper payments that result when applicants budget indirect
costs that are greater than the actual indirect costs the applicant can
expect to recover under Federal cost principles. Currently, new
grantees of the Department are not recovering any indirect costs until
they negotiate an indirect cost rate with their cognizant agencies.
These proposed regulations would help a new grantee by permitting it to
recover indirect costs at the temporary rate until it negotiate a rate
with its cognizant agency or for ninety days if it does not submit its
indirect cost rate proposal to its cognizant agency within the ninety-
day period.
The proposed regulations would also clarify how the modified total
direct cost base is determined when a grant is subject to the eight
percent indirect cost rate limitation for training grants and would
specify how that rate is applied when the Department awards a grant to
a group of applicants. These changes are necessary to correct an
oversight in the current regulations.
Significant Proposed Regulations
34 CFR Part 75
Section 75.560 General Indirect Cost Rates; Exceptions
The Secretary proposes to amend Sec. 75.560 (c) and (d) to specify
the procedures used to establish temporary indirect cost rates for any
grantee that does not have a federally recognized indirect cost rate.
The proposed language would require such a grantee to submit an
indirect cost rate proposal to its cognizant agency within ninety days
after the date the Department issues the Grant Award Notification to
the grantee. In most cases, the cognizant agency is the agency that
provides the most federal funding to a grantee under programs that
authorize grantees to charge indirect costs to their grants. Under the
proposed regulations, the grantee could charge indirect costs at a
temporary indirect cost rate of ten percent of the budgeted direct
salaries and wages. If a grantee does not submit an indirect cost rate
proposal to its cognizant agency by the end of the ninety-day period,
the proposed regulations would provide that the grantee could not
charge any more indirect costs to its grant until it negotiated a
federally recognized rate.
If a grantee negotiates an indirect cost rate that would recover
more funds than the temporary rate has recovered, the proposed
regulations would permit the grantee to recover the difference between
the amount it would have recovered under the federally recognized rate
and the amount it already recovered under the temporary rate after the
date the indirect cost proposal was submitted to the cognizant agency.
Example: The project period for a grant starts on June 1 and the
grantee starts recovering indirect costs at ten percent of direct
salaries and wages; the indirect cost proposal is submitted to the
cognizant agency on July 1; and the grantee obtains a federally
recognized indirect cost rate on September 15.
From June 1 through June 30, the grantee expends $5,000 in direct
salaries and wages. Using the temporary rate of ten percent of direct
salaries and wages, the grantee recovers $500 in indirect costs for
this period. From July 1 through September 15, the grantee charges its
grant $12,500 in direct salaries and wages, which produces an indirect
cost recovery of $1,250 under the temporary rate.
The grantee negotiates an indirect cost rate with its cognizant
agency of twenty percent of its modified total direct cost base. For
the period July 1 through September 15, the grantee expends $15,000 in
modified total direct costs. Thus, under the negotiated rate, the
grantee is entitled to recover $3,000 for the period July 1 through
September 15. Assuming sufficient funds are available within the grant
budget, the grantee can recover an additional amount of $1,750 in un-
recovered indirect costs for the period July 1 through September 15.
This $1,750 represents the difference between the $1,250 it already
recovered for that period and the $3,000 that it could have recovered
under the negotiated rate. The grantee cannot claim indirect costs at
the negotiated rate for the period June 1 through June 30 because it
did not submit its indirect cost proposal until July 1. However, it can
keep the $500 in indirect costs it recovered under the temporary rate
for that period. [End of example]
Under the proposed regulations, the grantee would have to obtain
prior approval from the Department to shift direct costs to indirect
costs. This limitation is needed to ensure that the shifting of funds
from direct costs to indirect costs does not result in a change in the
scope or objectives of the project. To reduce the potential for adverse
budget implications for the Department, the grantee would not be
permitted to request additional funds in order to fully recover
indirect costs.
[[Page 29099]]
Section 75.562 Indirect Cost Rates for Educational Training Projects
The Secretary proposes to amend Sec. 75.562(c) to clarify that--a
grantee cannot include the amount of a sub-award\1\ that exceeds
$25,000 in the modified total direct cost base used to determine and
charge its indirect cost rate. For example, if a grantee hired an
evaluator for its grant and the sub award to the evaluator cost the
grantee $60,000, the grantee could claim only the first $25,000 of that
contract in its claim for indirect costs. This exclusion of costs above
$25,000 for sub-awards recognizes the fact that the grantee is not
responsible for most of the costs of support services that the
contractor supplies for its own services to the grantee. That is
because the contractor builds those costs into the cost of the contract
to the grantee. Also, we note that if the contract is a multi-year
contract, the grantee can only recover indirect costs against the first
$25,000 of the contract in the first year of the contract because,
after the year that the grantee awards the contract, the grantee has no
special indirect costs associated with the contract.
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\1\ The term ``sub-award'' as used in the proposed regulation
covers both sub grants and contracts made under a grant. However,
because virtually all of the Department's discretionary grant
programs do not authorize grantees to award sub grants, we only
describe in this preamble the effect of the proposed regulation on
contracts awarded by grantees.
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These proposed regulations would also clarify that the definition
of the word equipment, as used in this section, is the same as the
definition of equipment in parts 74 and 80. Under that definition, a
grantee may choose to treat as equipment items of useful value of less
than $5,000 but, if it does so, all equipment above the lower threshold
must be excluded from the modified total direct cost base.
Example: If a grantee has a policy of capitalizing equipment that
costs $3,000 or more, then it must exclude all equipment that has a
useful value of $3,000 or more from the modified total direct cost base
for the project.
Section 75.564 Reimbursement of Indirect Costs
The Secretary proposes to amend Sec. 75.564(e) to clarify the
determination of indirect costs for a training grant in the context of
a grant to a group of organizations that apply together for a grant
under the procedures in 34 CFR 75.127--75.129.
Executive Order 12866
1. Potential Costs and Benefits
Under Executive Order 12866, we have assessed the potential costs
and benefits--both quantitative and qualitative--of this regulatory
action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those we have
determined to be necessary for administering the Department's Direct
Grant programs effectively and efficiently. In assessing the potential
costs and benefits of this regulatory action, we have determined that
the benefits would justify the costs.
Summary of Potential Costs and Benefits
These regulations impose no additional burdens on applicants for
discretionary grants or recipients of grants. The regulations merely
specify the rate at which grantees can recover indirect costs during a
temporary period when the grantee does not have an indirect cost rate
recognized by the Federal Government and establish procedural
requirements regarding temporary indirect cost rates. While these
proposed regulations would prohibit a grantee from recovering indirect
costs if the grantee has not submitted its indirect cost proposal
within the ninety days after the date the Department issues the grant
award notification, the burden and timing of submitting a proposal
under the federal cost principles does not change at all.
2. Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum on ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 75.210 General selection criteria.
Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section of this preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities because the proposed regulations do not impose any new burdens
at all.
Paperwork Reduction Act of 1995
These proposed regulations do not contain any information
collection requirements.
Intergovernmental Review
These proposed regulations affect Direct Grant programs of the
Department that are subject to Executive Order 12372 and the
regulations in 34 CFR part 79. One of the objectives of the Executive
order is to foster an intergovernmental partnership and to strengthen
federalism. The Executive order relies on processes developed by State
and local governments for coordination and review of proposed Federal
financial assistance.
This document provides early notification of our specific plans and
actions for these programs.
Assessment of Educational Impact
The Secretary particularly requests comments on whether these
proposed regulations would require transmission of information that any
other agency or authority of the United States gathers or makes
available.
Electronic Access to This Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/news/fedregister.
To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official
[[Page 29100]]
edition of the Federal Register and the Code of Federal Regulations
is available on GPO Access at:
http://www.gpoaccess.gov/nara/index.html.
(Catalog of Federal Domestic Assistance Number does not apply.)
List of Subjects in 34 CFR Part 75
Administrative practice and procedure, Education Department, Grant
programs--education, Grant administration, Performance reports,
Reporting and recordkeeping requirements, Unobligated funds.
Dated: May 18, 2007.
Margaret Spellings,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary proposes
to amend part 75 of title 34 of the Code of Federal Regulations as
follows:
PART 75--DIRECT GRANT PROGRAMS
1. The authority citation for part 75 continues to read as follows:
Authority: 20 U.S.C. 1221e-3 and 3474, unless otherwise noted.
2. Section 75.560 is amended by revising paragraphs (b) and (c),
redesignating paragraph (d) as paragraph (e) and adding a new paragraph
(d) to read as follows:
Sec. 75.560 General indirect cost rates; exceptions.
* * * * *
(b) A grantee must have obtained a current indirect cost rate
agreement from its cognizant agency, to charge indirect costs to a
grant. To obtain an indirect cost rate, a grantee must submit an
indirect cost proposal to its cognizant agency within ninety days after
the date the Department issues the grant award notification.
(c) If a grantee does not have a federally recognized indirect cost
rate agreement, the Secretary may permit the grantee to charge its
grant for indirect costs at a temporary rate of ten percent of budgeted
direct salaries and wages.
(d)(1) If a grantee fails to submit an indirect cost rate proposal
to its cognizant agency within the required ninety days, the grantee
may not charge indirect costs to its grant from the end of the ninety-
day period until it obtains a federally recognized indirect cost rate
agreement applicable to the grant.
(2) If the Secretary determines that exceptional circumstances
warrant continuation of a temporary indirect cost rate, the Secretary
may authorize the grantee to continue charging indirect costs to its
grant at the temporary rate specified in paragraph (c) of this section
even though the grantee has not submitted its indirect cost rate
proposal within the ninety-day period.
(3) Once a grantee obtains a federally recognized indirect cost
rate that is applicable to the affected grant, the grantee may use that
indirect cost rate to claim indirect cost reimbursement for
expenditures made on or after the date the grantee submitted its
indirect cost proposal to its cognizant agency or the start of the
project period, whichever is later. However, this authority is subject
to the following limitations:
(i) The total amount of funds recovered by the grantee under the
federally recognized indirect cost rate is reduced by the amount of
indirect costs recovered under the temporary indirect cost rate after
the date the indirect cost proposal was submitted to the cognizant
agency.
(ii) The grantee must obtain prior approval from the Secretary to
shift direct costs to indirect costs in order to recover indirect costs
at a higher negotiated indirect cost rate.
(iii) The grantee may not request additional funds to recover
indirect costs that cannot be recovered by shifting direct costs to
indirect costs.
* * * * *
3. Section 75.562 is amended by revising paragraph (c) to read as
follows:
Sec. 75.562 Indirect cost rates for educational training projects.
* * * * *
(c)(1) Indirect cost reimbursement on a training grant is limited
to the recipient's actual indirect costs, as determined in its
negotiated indirect cost rate agreement, or eight percent of a modified
total direct cost base, whichever amount is less.
(2) For the purposes of this section, a modified total direct cost
base consists of total direct costs minus the following:
(i) The amount of each sub-award in excess of $25,000.
(ii) Stipends.
(iii) Tuition and related fees.
(iv) Equipment, as defined in 34 CFR 74.2 and 80.3, as applicable.
Note: If the grantee has established a threshold for equipment
that is lower than $5,000 for other purposes, it must use that
threshold to exclude equipment under the modified total direct cost
base for the purposes of this section.
(3) The eight percent indirect cost reimbursement limit specified
in paragraph (c)(1) of this section also applies to sub-awards that
fund training, as determined by the Secretary under paragraph (b) of
this section.
(4) The eight percent limit does not apply to agencies of State or
local governments, including federally recognized Indian tribal
governments, as defined in 34 CFR 80.3.
(5) Indirect costs in excess of the eight percent limit may not be
charged directly, used to satisfy matching or cost-sharing
requirements, or charged to another Federal award.
* * * * *
4. Section 75.564 is amended by revising paragraph (e) to read as
follows:
Sec. 75.564 Reimbursement of indirect costs.
* * * * *
(e)(1) Indirect costs for a group of eligible parties (See
Sec. Sec. 75.127-75.129) are limited to the amount derived by applying
the rate of the applicant, or a restricted rate when applicable, to the
direct cost base for the grant in keeping with the terms of the
applicant's federally recognized indirect cost rate agreement.
(2) If a group of eligible parties applies for a training grant
under the group application procedures in Sec. Sec. 75.127-75.129, the
grant funds allocated among the members of the group are not considered
sub-awards for the purposes of applying the indirect cost rate in 34
CFR 75.562(c).
(Authority: 20 U.S.C. 1221e-3 and 3474)
[FR Doc. E7-10036 Filed 5-23-07; 8:45 am]
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