[Federal Register Volume 67, Number 155 (Monday, August 12, 2002)]
[Notices]
[Pages 52558-52560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20262]
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OFFICE OF MANAGEMENT AND BUDGET
Cost Principles for Educational Institutions, for State, Local,
and Indian Tribal Governments and for Non-Profit Organizations
AGENCY: Office of Management and Budget.
ACTION: Proposed revisions to Office of Management and Budget (OMB)
cost principles' Circulars A-21, A-87, and A-122.
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SUMMARY: OMB proposes to amend OMB cost principles A-21, A-87, and A-
122. These changes are intended to further the objectives of Public Law
(Pub. L.) 106-107, the Federal Financial Assistance Management
Improvement Act. On May 18, 2001, agencies working with OMB published a
plan to implement Pub. L. 106-107. The plan included a proposal to
simplify the cost principles to make the descriptions of similar cost
items consistent with one another where possible, thus reducing the
possibility of misinterpretation.
DATES: All comments on this proposal should be in writing and must be
received by October 11, 2002.
ADDRESSES: Due to potential delays in OMB's receipt and processing of
mail sent through the U.S. Postal Service, we encourage respondents to
submit comments electronically to ensure timely receipt. We cannot
guarantee that comments mailed will be received before the comment
closing date.
Electronic comments may be submitted to: [email protected].
Please include ``Cost Principles Revision Comments'' in the subject
line and put the full body of your comments in the text of the
electronic message and as an attachment. Please include your name,
title, organization, postal address, telephone number, and e-mail
address in the text of the message. Comments may also be submitted via
facsimile to 202-395-4915.
Comments may be mailed to Gilbert Tran, Office of Federal Financial
Management, Office of Management and Budget, Room 6025, New Executive
Office Building, NW., Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Gilbert Tran, Office of Federal
Financial Management, Office of Management and Budget, (202) 395-3052
(direct) or (202) 395-3993 (main office) and e-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
Background
The Federal Financial Assistance Management Improvement Act of 1999
(Pub. L. 106-107) provides both a mandate and a challenge for the
administration of Federal financial assistance programs and activities.
The purposes of Pub. L. 106-107 are to (1) improve the effectiveness
and performance of Federal financial assistance programs, (2) simplify
Federal financial assistance application and reporting requirements,
(3) improve the delivery of services to the public, and (4) facilitate
greater coordination among those responsible for delivering the
services. Federal financial assistance includes grants, cooperative
agreements, loans, loan guarantees, scholarships, and other forms of
assistance.
The grant and cooperative agreement portion of that enterprise,
commonly referred to as ``grants,'' involves more than 600 programs and
their subprograms, with awards of more than $325 billion a year
administered by 26 Federal agencies. Grant programs stimulate or
support public purposes in areas such as health, social services, law
enforcement, agriculture, housing, community and regional development,
economic development, education and training, and national security.
Many of these programs require complex arrangements, such as
intergovernmental coordination or public-private partnerships, to
coordinate and deliver the needed services. Among the recipient
constituencies are State, local, and Native American tribal
governments, public housing authorities and resident organizations, and
private, non-profit organizations, including institutions of higher
education. The funding mechanisms for these programs include mandatory
grants, such as formula and block grants, and discretionary grants and
cooperative agreements in support of specific programs or projects.
Public Law 106-107 states that some Federal administrative
requirements are duplicative, burdensome, and conflicting, sometimes
impeding cost-effective delivery of services at the local level. Grant
recipients deal with increasingly complex problems that require the
delivery and coordination of many kinds of services. Their need to
respond to numerous Federal grant administration requirements only adds
to that complexity.
Implementation of Public Law 106-107
The Director of OMB partnered with the Department of Health and
Human Services (HHS) and the former Grants Management Committee (GMC)
of the Chief Financial Officers Council to coordinate and oversee the
government-wide implementation of Pub. L. 106-107. Five interagency
groups were established to implement the steps laid out in the plan
that was submitted to Congress and OMB on May 18, 2001.
The General Policy and Oversight group provides detailed oversight
of the other work groups' planning and implementation efforts and is
examining broad issues. Three groups represent various parts of the
grant life cycle: Pre-Award; Post-Award; and Audit Oversight. The
Electronic Processing group supports the development of an electronic
option for application for and reporting of grants.
The Post-Award group includes a cost consistency sub-group charged
with reviewing the cost principles in OMB Circulars A-21, A-87, and A-
122 to ensure they are current, consistent, and appropriate for covered
recipients. The sub-group's objectives are to make the descriptions of
similar cost items consistent, where possible, and reduce the
possibility of misinterpretation by clarifying existing policies. The
sub-group's mission did not include adding restrictions or modifying
current requirements.
The three OMB's cost circulars established government-wide
principles for costs incurred under Federal awards (Circulars A-21,
``Cost Principles for Educational Institutions;'' A-87, ``Cost
Principles for State, Local and Indian Tribal Governments;'' and A-122,
``Cost Principles for Non-Profit Organizations''). These cost
principles specify allowable and unallowable costs. The three circulars
apply to different types of recipient entities and were developed
accordingly. As a result, in a number of cases, similar cost items are
described in varying terms. This can cause inconsistent interpretations
by Federal staff, recipients, and auditors. Public comments indicate
the need for language that is more consistent and for clarification
regarding some aspects of the cost principles. Many Federal assistance
grant programs require organizations that are subject to different cost
circulars to work together in consortia to achieve the objectives of a
grant program. It is important in these situations that, to the
greatest extent possible, all participants in a consortium be subject
to the same treatment for the same kinds of transactions.
The groups focused initially on the definitions in the circulars
and the 30 cost items that appear in all three cost circulars. They
drafted common descriptions for those cost items that should have
similar treatment, but are
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currently described differently. Where different outcomes are intended,
the language should definitely show the difference. Those cost items
that are currently in one or more but not all of the circulars also
have been reviewed to determine if it is appropriate and beneficial to
include them in one or both of the other cost circulars. In those cases
where the groups believe that a cost principle in one circular might be
applicable to entities subject to the other circulars, they have tried
to state the principle in such a way that it does not change the
current policy in the circulars to which the principle is added. In all
of the cases where a cost principle in one circular has been applied to
one or both of the other circulars, we have done that only to clarify
that the outcome is the same under the circular(s) to which the
principle is added.
The approach included:
Reviewing the cost item descriptions in all the circulars;
Noting the similarities and differences in the
descriptions;
Researching the history of the cost policies related to
the cost item;
Determining if the cost policies are consistent among the
circulars;
Preparing common language, where possible, for the
descriptions of those cost items that have a consistent cost policy
basis; and
Restating the principles in simpler language, to the
extent possible without changing the meaning of the principles.
Presentation of the Circulars
Rather than include the revised language in the three cost
principles separately, the team created a chart that allows side-by-
side comparison of proposed changes to the language contained in the
current circulars. In addition, the three circulars use different
standard terminology to refer to ``recipients'' and ``awards;'' the
groups adopted conventions for the circulars so they would all use the
same standard terminology. The conventions are as follows:
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Existing terms in A-21, A-
Proposed change language 87, and A-122
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``Non-Federal entity''.................... ``Institution,'' ``unit of
government'' and
``organization''
``Federal award''......................... ``Sponsored agreement,''
``Federal award'' and
``Sponsored award''
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When the cost principles are published in final form, OMB will use
the new conventions in the revised version. However, OMB plans to use
the same words to describe the units of organization, i.e., A-21 would
still be divided into ``sections'' and ``subsections'' while A-87 and
A-122 would still use ``paragraphs'' and ``subparagraphs.''
Clarity of the Regulations
Executive Order 12866, Regulatory Planning and Review, and the
Presidential memorandum on ``Plain Language in Government Writing''
require each agency to write regulations that are easy to understand.
OMB invites comments on how to make these cost principles easier to
understand, including answers to questions such as the following:
Are the requirements in the proposed circulars clearly
stated?
Do the cost principles contain technical terms or other
wording that interferes with their clarity?
Would the cost principles be easier to understand if
divided into more (but shorter) paragraphs or sections; or used the
question and answer format?
What else would make the proposed circulars easier to
understand?
To give commenters an idea about how a circular might appear in
plain language, the groups provided at the end of the chart a plain
language version of one cost item to show how it would look in a
different style of drafting.
Send any comments that concern how we could make these proposed
regulations easier to understand to the person listed in the ADDRESSES
section of the preamble. If the comments generated by the plain
language treatment indicate that the circulars could be written using
this convention, OMB will publish any changes based on those comments
for another round of comment.
Inadvertent Changes in Policy
OMB has not attempted to change the policy in any of the circulars.
However, in the effort to make the language more consistent, some
unintended changes in policy may have been made. OMB encourages
comments on any proposed changes that could be construed as changes to
current policy.
Also, there are places where different language in the current
circulars for a particular treatment could be viewed either as
intending the same or intending different policies. When faced with
this ambiguity, in most cases, OMB has not attempted to write a common
treatment. However, OMB is interested in comments on the extent to
which some of these treatments could be viewed as expressing the same
policy in all three circulars.
Response to Public Bodies and Cost Shifting
Where professional bodies such as the Financial Accounting
Standards Board (FASB) and the Governmental Accounting Standards Board
(GASB) have issued pronouncements that contradicted existing circular
provisions or otherwise clarified ``generally accepted accounting
principles'' (GAAP), the policy of the professional bodies has been
reflected in this draft.
Lastly, in the process of reviewing the circulars for better
consistency and clarity, we concluded that this provided another
opportunity to address an area of much confusion concerning one of the
general standards contained in A-87, Attachment A, C.3., Allocable
costs. In attempting to recognize situations where two or more Federal
programs might allow identical services or assistance and served the
identical population, an effort was made to distinguish between
``funding allocations'' vs. ``cost allocation''. Unfortunately, this
section was phrased in a manner that could be interpreted as allowing
cost shifting. Cost shifting has always been unallowable. The confusing
language has been eliminated in this Notice and no change in policy is
intended. The following reflects the proposed revision to OMB Circular
A-87, Attachment A, C.3.c., where the last sentence in brackets would
be deleted.
``Any cost allocable to a particular Federal award or cost
objective under the principles provided for in this Circular may not be
charged to other Federal awards to overcome fund deficiencies, to avoid
restrictions imposed by law or terms of Federal awards, or for other
reasons. [However, this prohibition would not preclude governmental
units from shifting costs that are allowable under two or more awards
in accordance with existing program agreements.]''
Organization of the Chart
In the chart, the first column lists the current A-21 item, the
second column lists the similar item, if any, from A-87, the third
column lists the similar item, if any, from A-122 and the fourth column
lists any proposed change to the item and which of the circulars would
include the revised item. In some cases one or more of the circulars do
not have a cost item that is included in one or more of the other
circulars. If a circular does not have an item equivalent to the other
circulars, the column for that circular is blank. Also, given the
separate development of the three circulars, some items contain more
than one concept and some of those concepts
[[Page 52560]]
are stated in different places in the other circulars. In some cases,
we have moved a cost item in one circular to the place where that item
appears in the other circulars. In every case where one circular
handles an item in a different place than the others, we explain in the
fourth column where we propose to treat a particular concept in the
three circulars.
How To Obtain the Chart
Due to its size, the chart is not printed in this Federal Register
notice. It is displayed on the OMB Web site at: http://www.omb.gov
under the ``Grants Management/Current Documents'' section. You can also
request a hard copy by calling Gilbert Tran at (202) 395-3052.
Dated: July 31, 2002.
Mark W. Everson,
Controller.
[FR Doc. 02-20262 Filed 8-9-02; 8:45 am]
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