OFFICE
OF MANAGEMENT AND BUDGET
Governmentwide
Grants Management Requirements
AGENCY:
Office of Management and Budget.
ACTION:
Final Revision of OMB Circulars A-21, A-87, A-102, A-110 and A-122
and Interim Final Revision of OMB Circular A-110.
SUMMARY:
The Office of Management and Budget (OMB) is issuing final
revisions to five OMB circulars and, in addition, OMB is issuing
interim final amendments to one of these circulars to reflect the
Single Audit Act Amendments of 1996. The five Circulars are A-21
("Cost Principles for Educational Institutions"), A-87 ("Cost Principles
for State and Local Governments"), A-102 ("Grants and Cooperative
Agreements with State and Local Governments"), A-110 ("Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals, and Other Non-Profit Organizations"), and
A-122 ("Cost Principles for Non-Profit Organizations"). The purpose
of these revisions is to provide a conditional exemption from OMB's
grants management requirements and a conditional class deviation
from the agencies' Grants Management Common Rule for certain Federal
grant programs with statutorily-authorized consolidated planning
and consolidated administrative funding, that are identified by
a Federal agency and approved by the head of the Executive department
or establishment. Additionally, OMB is issuing interim final conforming
amendments to Circular A-110 to reflect the enactment of the Single
Audit Act Amendments of 1996, the recent rescission of OMB Circular
A-128 ("Audits of State and Local Governments"), and the consolidation
of its provisions in a revised OMB Circular A-133, "Audits of States,
Local Governments, and Non-Profit Organizations."
DATES:
The final revisions and interim final amendments are effective [30
days after publication]. All comments on the interim final amendments
should be in writing and must be received by [60 days from publication].
Late comments will be considered to the extent practicable.
ADDRESSES:
Comments should be mailed to Grants Management Audit Docket,
Office of Federal Financial Management, Office of Management and
Budget, Room 6025 New Executive Office Building, Washington, DC
20503. Electronic mail (E-mail) comments may be
submitted via the Internet to kahlow_b@a1.eop.gov. Please include
the full body of E-mail comments in the text of the message and
not as an attachment. Please include the name, title, organization,
postal address, and E-mail address in the text of the message.
FOR
FURTHER INFORMATION CONTACT: Barbara F. Kahlow, Office
of Financial Federal Financial Management, Office of Management
and Budget, (202) 395-3053. The revised OMB Circulars A-21, A-87,
A-102, A-110, and A-122 are available electronically on the OMB
Home Page at /OMB. These revised Circulars are also available in
paper format by contacting the OMB Publications Office at (202)
395-7332.
SUPPLEMENTARY
INFORMATION: On May 14, 1997, the Office of Management
and Budget (OMB) proposed a revision (62 FR 26577) of OMB Circulars
A-21, "Cost Principles for Educational Institutions," A-87, "Cost
Principles for State and Local Governments," A-102, "Grants and
Cooperative Agreements with State and Local Governments," A-110,
"Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations," and A-122, "Cost Principles for Non-Profit Organizations."
The proposal would provide a conditional exemption from OMB's grants
management requirements and a conditional class deviation from the
agencies' Grants Management Common Rule (GMCR) for certain Federal
grant programs with statutorily-authorized consolidated planning
and consolidated administrative funding, that are identified by
a Federal agency and approved by the head of the Executive department
or establishment.
This
exemption could be granted to related Federal non-entitlement grant
programs which are administered by State and local governments and
which have the following characteristics: the related programs (1)
serve a common program purpose, (2) have specific statutorily-authorized
consolidated planning and consolidated administrative funding, and
(3) are administered by State agencies which are funded mostly by
non-Federal sources. In order to promote efficiency in the State
and local program administration of such related programs, Federal
agencies could exempt these covered State-administered, non-entitlement
grant programs from Federal grants management requirements in OMB
Circulars A-21, A-87, A-110, and A-122, and the GMCR. The exemptions
would be from all but the allocability-of-costs provisions of Circulars
A-21 (Section C, subpart 4), A-87 (Attachment A, subsection C.3),
and A-122 (Attachment A, subsection A.4), and from all of the administrative
requirements provisions of Circular A-110 and the GMCR.
A Federal
agency would have the discretion to exempt a Federal grant program
from the Federal grants management requirements. A Federal agency
shall consult with OMB during its consideration of whether to grant
such an exemption.
If
a Federal agency exempts a Federal grant program from these requirements,
a State would only qualify if it adopts its own written fiscal and
administrative requirements for expending and accounting for all
funds, which are consistent with the provisions of OMB Circular
A-87, and extends such requirements to all subrecipients. These
fiscal and administrative requirements must be sufficiently specific
to ensure that: funds are used in compliance with all applicable
Federal statutory and regulatory provisions, costs are reasonable
and necessary for operating these programs, and funds are not to
be used for general expenses required to carry out other responsibilities
of a State or its subrecipients. If a State does not adopt such
fiscal and administrative requirements, then it would continue to
be subject to the Federal grants management requirements.
Response
to Comments
OMB
received eight comment letters: three from Federal agencies, one
from a local government, two from universities, one from a non-profit
organization, and one from an interest group.
Four
of the letters did not address the substance of the proposed revisions.
The letter from the local government asked if the proposal had any
relationship to the recent revision of OMB Circular A-133, "Audits
of States, Local Governments, and Non-Profit Organizations," on
June 24, 1997 (62 FR 35278); in response to this question, these
revisions are not related to that revision of Circular A-133. The
letter from the non-profit organization raised concerns about certain
other provisions in OMB Circular A-122 which are unrelated to the
proposal; OMB will consider these concerns in connection with its
review of Circular A-122. A letter from one of the Federal agencies
requested an unrelated change to the GMCR and OMB Circular A-110;
the issue raised will be considered during OMB's future review of
those provisions. A letter from another Federal agency raised concerns
about OMB's denial of certain other, unrelated waiver requests from
that agency which would have been applicable only to that agency's
grant programs.
The
other four letters addressed the substance of the proposed revisions.
The interest group commenter supported the proposed revisions and
recommended that the flexibility afforded to State-administered
programs be extended to local-administered programs. This recommendation
for flexibility for local-administered programs will be considered
during OMB's future review of the five circulars.
The
two university commenters objected to the proposal because of its
possible effect on those subrecipients, including subcontractors,
that are universities. Specifically, the university commenters preferred
to be subject only to OMB Circulars A-21 and A-110 (and not also
to State grants management requirements) because "We have found
that state government does not always do a good job communicating
to us what the guidelines are for a given program." The university
commenters stated that they are familiar with Circulars A-21 and
A-110 and "have systems in place to deal with them." Finally, the
Federal agency commenter found the proposal unclear and felt that
"the funding agency needs to have not only accountability, but also
the consistent accountability afforded by currently imposed Federal
cost principles and uniform administrative requirements." The commenter
raised a concern about the possible inefficiency of having more
than one State grants management system, with one for exempted grant
programs (and other State programs), and one for the rest of the
Federal grant programs.
OMB
would also be concerned if the proposed changes increased burden
on State grantees or their subrecipients, as the three commenters
apparently believed. However, State grants management requirements
instead of Federal grants management requirements currently apply
to several previously-exempted Federal programs as well as to State-funded
programs which have no Federal funding. In 1981 and 1982, OMB waived
the application of Circulars A-21, A-87, A-102, A-110, and A-122
for certain, selective State-administered programs. As a consequence,
OMB believes that the addition of programs with shared, statutorily-authorized
consolidated planning and consolidated administrative funding with
these already-exempted programs would not result in additional burden
on subrecipients and would not result in increased inefficiency.
Since OMB does not believe that any negative effects on grantees
or subrecipients will ensue from the proposed revisions, OMB is
finalizing them.
Accordingly,
to provide such a conditional exemption, OMB is adopting the proposed
revisions and amending: Section A.3 of Circular A-21; Attachment
A Section A.3 of Circular A-87; Section 2 of Circular A-102; Subpart
C of Circular A-110 (as a new Section __.29 instead of as Section
__.45 as proposed); and, Attachment A Section A of Circular A-122.
The amendments are set forth below.
Interim
Final Conforming Amendments
In
addition to adopting the proposed revisions to the five circulars,
OMB is also making conforming amendments to Circular A-110 to reflect
the enactment of the Single Audit Act Amendments of 1996 (Public
Law 104-156, 110 Stat. 1396) and OMB's rescission of Circular A-128
("Audits of State and Local Governments") and its issuance of the
June 24, 1997, revision of OMB Circular A-133 (62 FR 35278, June
30, 1997). The provisions of the 1996 Act and of the revised Circular
A-133 apply to audits of fiscal years beginning after June 30, 1996.
The revised Circular A-133 co-locates audit requirements for States,
local governments, and non-profit organizations. As a consequence,
OMB rescinded OMB Circular A-128.
Currently,
Circular A-110 refers to the Single Audit Act of 1984 (which was
superseded by the 1996 Act), to Circular A-128 (which was rescinded),
and to the former version of OMB Circular A-133 (which covered only
non-profit organizations, and did not cover State and local governments).
These interim final conforming amendments update these references.
Additional conforming changes were made to conform with the 1996
Act and revised Circular A-133 (e.g., to reflect that, under the
1996 Act, all non-profit hospitals are now subject to the Act).
OMB
has determined, under 5 U.S.C. 553(b)(B), that good cause exists
to issue these conforming amendments on an interim final basis.
The conforming amendments update the references to the applicable
statute and circulars, by replacing the superseded references with
current ones. Moreover, under the Single Audit Act Amendments of
1996, the provisions of the 1996 Act (which are reflected in the
revised OMB Circular A-133) provide standards that are effective
for audits of fiscal years beginning after June 30, 1996. Accordingly,
OMB has determined that issuing a proposal for comment on these
conforming amendments would be "impractical, unnecessary, and contrary
to the public interest."
Availability
of Revised Circulars
OMB
has prepared updated versions of the five circulars, as amended
herein. The revised OMB Circulars A-21, A-87, A-102, A-110, and
A-122, as amended herein, are available electronically on the OMB
Home Page at /OMB. These revised Circulars, as amended herein, are
also available in paper format by contacting the OMB Publications
Office at (202) 395-7332.
Joseph
J. Minarik
Acting Director
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1.
OMB hereby amends Circulars A-21, A-87, A-102, A-110, and A-122
by adding the three paragraphs that follow, regarding "Conditional
exemptions," at the specified places in each Circular: (1) as a
new paragraph d under A.3 Purpose and Scope, Application of Circular
A-21; (2) as a new paragraph e under Attachment A, A.3 Purpose and
Scope, Application of Circular A-87; (3) as a new paragraph j under
Section 2, Post-award Policies of Circular A-102; (4) as a new Section
__.29 under Subpart C, Post-award Requirements of Circular A-110;
and, (5) as a new paragraph 7 under Attachment A, A. Basic Considerations
of Circular A-122:
Conditional
exemptions. (1) OMB authorizes conditional exemption from OMB
administrative requirements and cost principles circulars for certain
Federal programs with statutorily-authorized consolidated planning
and consolidated administrative funding, that are identified by
a Federal agency and approved by the head of the Executive department
or establishment. A Federal agency shall consult with OMB during
its consideration of whether to grant such an exemption.
(2)
To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have
specific statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these
covered State-administered, non-entitlement grant programs from
certain OMB grants management requirements. The exemptions would
be from all but the allocability of costs provisions of OMB Circulars
A-87 (Attachment A, subsection C.3), "Cost Principles for State,
Local, and Indian Tribal Governments," A-21 (Section C, subpart
4), "Cost Principles for Educational Institutions," and A-122 (Attachment
A, subsection A.4), "Cost Principles for Non-Profit Organizations,"
and from all of the administrative requirements provisions of OMB
Circular A-110, "Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals,
and Other Non-Profit Organizations," and the agencies' grants management
common rule.
(3)
When a Federal agency provides this flexibility, as a prerequisite
to a State's exercising this option, a State must adopt its own
written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions
of OMB Circular A-87, and extend such policies to all subrecipients.
These fiscal and administrative requirements must be sufficiently
specific to ensure that: funds are used in compliance with all applicable
Federal statutory and regulatory provisions, costs are reasonable
and necessary for operating these programs, and funds are not be
used for general expenses required to carry out other responsibilities
of a State or its subrecipients.
2.
OMB hereby amends paragraphs (a), (b) and (c) of Section __.26 of
OMB Circular A-110 to read as follows:
___.26
Non-Federal audits.
(a)
Recipients and subrecipients that are institutions of higher education
or other non-profit organizations (including hospitals) shall be
subject to the audit requirements contained in the Single Audit
Act Amendments of 1996 (31 USC 7501-7507) and revised OMB Circular
A-133, "Audits of States, Local Governments, and Non-Profit Organizations."
(b)
State and local governments shall be subject to the audit requirements
contained in the Single Audit Act Amendments of 1996 (31 USC 7501-7507)
and revised OMB Circular A-133, "Audits of States, Local Governments,
and Non-Profit Organizations."
(c)
For-profit hospitals not covered by the audit provisions of revised
OMB Circular A-133 shall be subject to the audit requirements of
the Federal awarding agencies.
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