[Federal Register Volume 75, Number 177 (Tuesday, September 14, 2010)]
[Rules and Regulations]
[Pages 55663-55671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22705]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 75, No. 177 / Tuesday, September 14, 2010 /
Rules and Regulations
[[Page 55663]]
OFFICE OF MANAGEMENT AND BUDGET
2 CFR Part 170
RIN 0348-AB61
Requirements for Federal Funding Accountability and Transparency
Act Implementation
AGENCY: Office of Federal Financial Management, Office of Management
and Budget (OMB).
ACTION: Interim final guidance to agencies with opportunity for
comment.
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SUMMARY: OMB is issuing interim final guidance to agencies to establish
requirements for Federal financial assistance applicants, recipients,
and subrecipients that are necessary for the implementation of the
Federal Funding Accountability and Transparency Act of 2006, hereafter
referred to as ``the Transparency Act'' or ``the Act''. This interim
final guidance provides standard wording for an award term that each
agency must include in grant and cooperative agreement awards it makes
on or after October 1, 2010, to require recipients to report
information about first-tier subawards and executive compensation under
only those awards. This implementation of the requirement for reporting
of subawards and executive compensation under Federal assistance awards
parallels the implementation for subcontracts and executive
compensation under Federal procurement contracts, which is in the
Federal Acquisition Regulation.
DATES: The effective date for this interim final guidance is September
14, 2010. Comments on the interim final guidance must be received by no
later than October 14, 2010.
ADDRESSES: Comments may be sent to regulations.gov, a Federal E-
Government Web site that allows the public to find, review, and submit
comments on documents that agencies have published in the Federal
Register and that are open for comment. Simply type ``FFATA subaward
reporting'' (in quotes) in the Comment or Submission search box, click
Go, and follow the instructions for submitting comments. Comments
received by the date specified above will be included as part of the
official record and considered in preparing the final guidance.
Marguerite Pridgen, Office of Federal Financial Management, Office
of Management and Budget, 725 17th Street, NW., Washington, DC 20503;
telephone 202-395-7844; fax 202-395-3952; e-mail [email protected].
FOR FURTHER INFORMATION CONTACT: Marguerite Pridgen, Office of Federal
Financial Management, Office of Management and Budget, telephone (202)
395-7844 (direct) or (202) 395-3993 (main office) and e-mail:
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
On June 6, 2008 [73 FR 32417], the Office of Management and Budget
(OMB) published proposed guidance to Federal agencies with an award
term needed to implement requirements related to subaward reporting
under the Federal Funding Accountability and Transparency Act of 2006
(Pub. L. 109-282, as amended by section 6202 of Public Law 110-252,
hereafter referred to as ``the Transparency Act'' or ``the Act''). The
guidance was proposed for adoption in a new part 33 within title 2 of
the Code of Federal Regulations (CFR).
We are adopting the interim final guidance in 2 CFR part 170, a
different 2 CFR part than part 33 in which we originally proposed to
adopt it in June 2008. The reason is that part 33 now is within a newly
created subchapter in 2 CFR that is for OMB guidance related to pre-
award responsibilities (for more information on the new 2 CFR
subchapters, see the notice in today's Federal Register that adopts 2
CFR part 25). The content of the guidance following this preamble is
better suited to another new subchapter for guidance on national policy
requirements, a subchapter that includes part 170.
We received comments from 75 entities in response to the 2008
Federal Register notice, including: 29 State agencies and two
associations of State officials; 16 institutions of higher education
and an association of research universities; six nonprofit
organizations and an association of nonprofits; two local governmental
organizations and an association of local government officials; two
commercial firms; one individual; and 14 Federal agencies. Some of the
comments concerned subaward reporting under the Transparency Act but
were not directly related to the content of the guidance. For example,
we received comments that suggested:
Specific data elements that either should be included in,
or excluded from, the information that will be required for each
subaward.
A need for better definitions of some data elements or
clarification of the information desired in some data fields.
Using the same information technology systems for
submission of data on both: (1) Subawards under Federal assistance
awards subject to the Transparency Act's requirements; and (2)
subcontracts that entities receiving Federal procurement contracts must
submit under the Act.
Other specific features that it would be important to
include in those information technology systems.
When we received them in 2008, we referred comments that do not
directly relate to the policy guidance to the appropriate Federal
agency groups, including the groups that were working on the design of
systems to which entities will submit data to fulfill their reporting
responsibilities under the Act. As stated in the 2008 Federal Register
notice, the data elements and other aspects of subaward reporting are
separate from the policy guidance. The General Services Administration
has recently published the information collections with an opportunity
for public comment that provide the specific data elements required for
Transparency Act reporting of subawards and executive compensation [75
FR 43165]. The Federal acquisition councils have simultaneously
published for public comment their proposed information collection for
subcontract reporting pursuant to the Transparency Act.
As it was proposed in 2008, the new part 33 would have required
direct recipients of Federal agency awards and, with some exceptions,
subrecipients at all lower tiers (if their
[[Page 55664]]
subawards were subject to Transparency Act reporting requirements) to
have DUNS numbers and register in the CCR. Since the publication of the
June 2008 proposal, OMB proposed a new part 25 to 2 CFR on February 18,
2010 [75 FR 7316]. The proposed part 25 superseded the DUNS number and
CCR elements of the June 2008 notice and limited the DUNS number
requirement to applicants, recipients, and first-tier subrecipients
only. The preamble of the February 2010 Federal Register document also
contained responses to the public comments on the DUNS and CCR
requirements proposed in June 2008. Part 25 is being finalized in
another document in this section of today's Federal Register.
Therefore, the DUNS and CCR requirements will not be addressed further
in this document. The remainder of this document addresses the portions
of the 2008 proposal related to reporting of subawards, as well as the
additional reporting on executive compensation that is required by the
subsequent amendment to the Transparency Act. In developing the interim
final policy guidance on subaward reporting, we considered:
All comments relevant to that subject in the 2008
proposal;
The experience gained under the guidance for, and
practical implementation of, recipient reporting required by section
1512 of the American Recovery and Reinvestment Act of 2009 (Pub. L.
111-5, hereafter referred to as ``the Recovery Act''), which we
consider to be the pilot program for subaward reporting envisioned by
paragraph (d)(1) of section 2 of the Transparency Act; and
New transparency and Open Government policies put in
effect since the publication of the 2008 proposal, including the
amendment of the Transparency Act by section 6202 of Public Law 110-252
to require the reporting of the names and total compensation of a
recipient's or subrecipient's five most highly compensated executives.
Because most aspects of this guidance were proposed in 2008, with
opportunity for comment, and given the public benefits to be gained by
expediting the implementation of subaward reporting under the
Transparency Act, we are publishing this guidance as interim final.
The following section provides detailed responses to comments that
we received on the portions of the guidance proposed in 2008 that are
relevant to subaward reporting. Each response describes any revisions
that we included in the interim final guidance as a result of the
comment.
II. Comments, Responses, and Changes to the Guidance
A. Comments on the 2008 Federal Register Preamble
Comment: Two commenters noted that the preamble of the 2008 Federal
Register notice missed one data element--an award title descriptive of
the purpose of the funding action--when it listed the data elements
that the Transparency Act specifies for Federal agencies' awards.
Response: The commenters are correct that the Act specifies the
additional data element. The inadvertent omission did not affect the
proposed guidance, however. The data elements were listed solely as
background explanatory information in the preamble of the 2008 Federal
Register notice.
Comment: With respect to that same list of data elements in the
preamble, one commenter asked whether the inclusion of the country of
the recipient and its parent entity was a typographical error. The
commenter suggested that the data element likely was meant to be the
county, rather than the country.
Response: Although the specifics of the data elements do not affect
the guidance, the data element specified in the Transparency Act is the
country, rather than the county.
B. General Comments Related to the Act and Guidance
Comment: Thirty nine commenters expressed concern that recipients
and subrecipients must allocate additional resources in order to comply
with the new requirements for subaward reporting. They cited the need
to change business processes and systems to begin to collect data that
they are not collecting now and do it electronically. They also noted
the continuing need for resources to compile and report data after that
initial transition period. Most of the commenters noted the fiscal
impact of subaward reporting and the provision in the Transparency Act
that provides for recovering the additional costs. Some State agencies
expressed concern that the increased administration costs would deplete
resources available for program purposes and some suggested that the
new requirement is an unfunded mandate. Some institutions of higher
education noted that the limitation in OMB Circular A-21 on recovery of
indirect costs could prevent them from recovering those costs from
their Federal awards. Some State agencies suggested that the costs
should be allocable as direct program costs. A number of commenters
were concerned that the added burdens of reporting could discourage
some entities, especially smaller subrecipient entities, from applying
for Federal grants.
Response: This guidance requires only prime grant recipients to
report to the Federal Government on subawards and executive
compensation. Nevertheless, we understand the administrative changes
and effort that are associated with reporting on subawards. As section
(d)(2)(A) of the Transparency Act provides, recipients and
subrecipients are allowed ``to allocate reasonable costs for the
collection and reporting of subaward data as indirect costs.'' We will
assess the overall cost impact of the new requirements on recipients
and subrecipients, as well as their ability to recover the indirect
costs under current limitations in statute, policy, program
regulations, or practice.
Comment: Nine commenters suggested that it was premature to propose
the policy guidance. Among reasons given were that we did not yet
provide details about all data elements that will be required in each
report of an obligating action, the definitions of the data elements,
and the reporting format and procedures that will be used. A few
commenters noted that the award term in the proposed guidance referred
to a Web site at which entities would submit subaward data but observed
that the site was not ready to receive data and had no further details
on what or how to report. One commenter asked if there was an exception
process when there are systems issues to be resolved.
Response: We revised the wording of the award term to further
clarify that the Web site will be the source of the detailed
information on what to report (i.e., the specific data elements and
their definitions) and how to report (i.e., the formats and information
technology system features). That information will be posted at the Web
site before non-Federal entities are required to report data on
subaward obligations. In addition, the General Services
Administration's Paperwork Reduction Act information collection also
provides the specific data elements required for Transparency Act
reporting.
There is an important distinction to be made between the policy
guidance contained in this Federal Register notice and the operational
details on what and how to report. Under the current statute, non-
Federal entities will be required to report subaward data, a basic
requirement that does not depend on the specific data elements and
[[Page 55665]]
procedural details. The policy guidance and the award term it contains
are the means for having agencies formally communicate that basic
statutory requirement to recipients and subrecipients. Neither the
guidance nor the award term needs to contain the operational details
about the specific data elements to be reported or how to submit the
data. Both need to be in place now so that agencies can use the award
term to provide timely notification to recipients and subrecipients
about their responsibilities.
Nonetheless, we fully recognize that the operational details also
are very important. To ensure adequate opportunity for public comment,
we have published the data elements and other details that affect the
public. Further, we have made every effort to minimize the burden
associated with Transparency Act reporting, through both pre-population
of data and use of an electronic system that facilitates streamlined
reporting [75 FR 43165-43166]. With respect to the question concerning
the exception process, the Transparency Act does not provide for
exceptions due to unresolved systems issues.
Comment: Twenty two commenters recommended delaying the January 1,
2009, date on which the Transparency Act provided that subaward
reporting would begin. They stated that the implementation timeframe
was not reasonable, especially since the procedures for compiling and
submitting the data would not be set until after completion of a pilot
that had not yet begun. Seven of the commenters also recommended that
OMB grant the 18-month extension to the deadline that the Act allowed
for subrecipients under awards to State, local, and tribal governments,
if the Director of OMB determined that compliance would impose an undue
burden for those subrecipients.
Response: A subaward reporting pilot was conducted in the Fall of
2008 to assess the burden of subaward reporting on recipients and
subrecipients. The results of the pilot were mixed and showed that
there were various unresolved policy and procedural issues surrounding
subaward reporting. In 2009, the Recovery Act was enacted and required
reporting of funds awarded to prime recipients, subrecipients and
vendors. The Recovery Act reporting effort, which commenced in October
2009, served as a demonstration of subaward reporting on a
governmentwide scale which is why we consider it to be the pilot
program for subaward reporting envisioned by paragraph (d)(1) of
section 2 of the Transparency Act. Various audits and reviews have been
conducted on Recovery Act implementation. Some of the reports from
those reviews are available on the Recovery.gov Web site under the
``Accountability'' section and include information on recipient
challenges with implementing reporting requirements under the Recovery
Act.
In a memorandum dated April 6, 2010 with the subject line ``Open
Government Directive--Federal Spending Transparency,'' OMB established
an October 1, 2010 deadline for Federal agencies to initiate subaward
reporting pursuant to the Transparency Act and provide a timeline for
additional guidance to assist in meeting the goals established in the
memorandum.
Comment: Three commenters pointed out that the proposed guidance
did not include a detailed implementation of a Transparency Act
provision that provides an exemption from the subaward reporting
requirement for an entity that demonstrates to the Director of OMB that
its gross income, from all sources, did not exceed $300,000 in the
previous tax year. The Act provides for the exemption until the
Director determines that the imposition of the reporting requirement
will not place an undue burden on such entities. The commenters noted
that the guidance did not disclose how to request a reporting
exemption, what proofs would be required, and what evaluation factors
OMB would use in granting exemptions.
Response: The award term in Appendix A to part 170 of the guidance
properly includes that exception to the subaward reporting requirement.
Section 2(e) of the Transparency Act allows the Director, OMB, to
exempt any entity that demonstrates its gross income, from all sources,
did not exceed $300,000 in the entity's previous tax year, from
reporting the first-tier subaward information, until the Director
determines that the imposition of the reporting requirement will not
cause undue burden on the entity. The Director has exempted entities
that fall under this category at this time.
Comment: Two commenters raised questions concerning the
applicability of the Paperwork Reduction Act (PRA). One stated that the
Transparency Act and guidance did not comply with the PRA. The other
suggested that OMB could not yet provide the PRA clearance for the
information collection associated with subaward reporting, because the
data elements and format were not specified in the guidance proposed on
2008.
Response: As stated in the response to a previous comment, the
nature of the guidance is distinct from that of the operational
details. What requires PRA clearance, as correctly noted by the second
commenter, are the data elements and similar details for which
reporting burdens can be estimated. The General Services Administration
has recently published the information collections for public comment
that provide the specific data elements required for Transparency Act
reporting of subawards and executive compensation [75 FR 43165]. It is
not pertinent to the issuance of the guidance in this Federal Register
notice on the basic statutory requirement to report.
Comment: With respect to the requirement to report each action
under a subaward that obligates $25,000 or more in Federal funding, ten
commenters recommended raising the $25,000 threshold due to the
potential magnitude of the burdens, especially on small entities. The
commenters suggested setting the threshold at $100,000 or more, to be
parallel with their State's reporting requirement, the simplified
acquisition threshold for Federal procurement contracts, or the
threshold in OMB Circular A-133 at which an entity must have a single
audit. One State agency asked if it could request a waiver to increase
that threshold.
Response: We made no change to the threshold in the guidance. The
$25,000 threshold is set by the Transparency Act and there is no
provision in the statute that authorizes a waiver to increase the
threshold.
Comment: Four commenters stated that the new subaward reporting
requirement overlapped with at least some Federal agencies' existing
requirements for reporting on subawards. As an example, one commenter
cited information about subawards that applications to agencies either
contain or could be amended to contain. Two non-Federal entities and
one Federal agency were concerned that the existing and new
requirements could be redundant, thereby unnecessarily increasing the
burdens of subaward reporting. One Federal agency stated that it
currently obtained information about all subawards, and not just those
above the $25,000 threshold, and did not want to lose insight into the
subawards below $25,000 due to the Transparency Act threshold.
Response: Relatively few Federal agency awarding offices currently
obtain the details about each subaward obligation that they would need
to do the reporting under the Transparency Act. Many agencies receive
individual applications that identify the applicant's
[[Page 55666]]
intent to make a subaward of a specified amount if its application is
successful. However, the actual subaward recipient may not be known at
that time or, if known, the amount that a successful applicant
obligates may not be the same as it originally planned and proposed,
for various reasons (e.g., the Federal award it receives may be for a
lesser amount than it proposed or it may rebudget after receiving the
award, as pertinent Federal rules allow it to do without the Federal
agency's prior approval). Given that what the application describes is
only a plan, it cannot serve as a definitive source of information for
Transparency Act purposes. At this time, we are not asking for
reporting of subaward information below the first-tier.
With respect to the relatively few Federal awarding offices that do
obtain post-award data on actual subaward obligations, we are directing
those agencies to take the necessary steps to ensure that their
recipients are not required, due to the combination of agency-specific
and Transparency Act reporting requirements, to submit the same or
similar data multiple times during a given reporting period.
Comment: Five commenters asked about the consequences of a
subrecipient's noncompliance with requirements related to the
Transparency Act. Two commenters expressed concern that delivery of
essential services could be interrupted if awards could not be made or
payments had to be suspended.
Response: After a subaward is made, the range of consequences that
may result from the subrecipient's material failure to comply with a
requirement related to the Transparency Act should be no different than
it is for a material failure to comply with other Federal requirements.
The same remedies are available to the recipient and--should the matter
of a subrecipient entity's noncompliance become an issue for the
Federal Government--to a Federal agency.
C. Comments Related to the Applicability of the Guidance
Comment: One commenter stated that the guidance should not apply to
loan guarantees because the definition of ``federal award'' in the
Transparency Act does not explicitly mention them. The commenter
expressed concern that the requirement in the guidance for lenders,
small businesses, and rural businesses to obtain DUNS numbers could be
an added barrier to their participation in U.S. Department of
Agriculture (USDA) rural development and Small Business Administration
(SBA) programs that stimulate financing for small and rural businesses.
The commenter recommended not applying the guidance to loan guarantees
under those programs until a Federal Register notice was published,
with an opportunity to comment, that proposed applying Transparency Act
requirements to those programs specifically.
Response: Although the 2008 Federal Register notice proposed
applicability of the guidance broadly to all of the types of financial
assistance subject to the Transparency Act, we revised the interim
final guidance to implement at this time only the reporting
requirements specifically for first-tier subawards under grants and
cooperative agreements in light of these public comments and concerns.
We are deferring to a later date the implementation of subaward
reporting under other financial assistance subject to the Act, which
includes loans and loan guarantees, as well as lower-tier subawards.
We understand the legitimate concern that additional administrative
requirements can have an impact on financial assistance applicants and
recipients under any Federal program. However, to publish a notice that
lists the hundreds of programs individually would be unnecessary and
impractical.
Comment: One Federal agency suggested we make it clearer that
financial assistance provided through assessed and voluntary
contributions is subject to the guidance, by explicitly listing that
type of assistance in the proposed definition of ``Federal financial
assistance subject to the Transparency Act.'' The definition in section
33.325 of the proposed guidance included them only implicitly, through
the inclusion of a category of ``other financial assistance
transactions that authorize the non-Federal entities' expenditure of
Federal funds.''
Response: We agree and made the change to the guidance (in what now
is section 170.320).
Comment: A Federal agency recommended that the guidance not apply
to loans, loan guarantees, interest subsidies, and insurance that
recipients provide as subawards to subrecipients. The agency stated
that the Transparency Act did not explicitly identify them as subawards
and their inclusion would be inconsistent with coverage of the
administrative requirements for grants to and agreements with
educational and other nonprofit organizations that are in 2 CFR part
215 (OMB Circular A-110).
Response: We did not revise the guidance. The Act requires OMB to
``ensure that data regarding subawards are disclosed in the same manner
as data regarding other Federal awards.'' The Transparency Act's
definition of ``federal award'' includes types of financial assistance
awards that are not subject to the administrative requirements in 2 CFR
part 215, and therefore includes them both at the prime tier between
Federal agencies and recipients and at lower tiers between recipients
and subrecipients. While only subawards under grants and cooperative
agreements need to be reported at this time, subawards under all types
of Federal financial assistance subject to the Transparency Act will
need to be reported at a later date.
Comment: One Federal agency expressed concern that it would be
difficult to provide an actual dollar amount associated with a transfer
of title to Federally owned property.
Response: We revised the definition of ``Federal financial
assistance subject to the Transparency Act'' in that section (which now
is section 170.320) to clarify that the guidance does not apply to
transfers of title to Federally owned property.
Comment: One Federal agency suggested amending the proposed
guidance to explicitly exclude Cooperative Research and Development
Agreements (CRDAs) under 15 U.S.C. 3710a from coverage under the
Transparency Act. CRDAs are instruments authorized for use between
Federal laboratories and non-Federal entities for technology transfer
purposes. The commenter noted that the statute permits a Federal
laboratory to receive funds from a non-Federal entity under a CRDA and
expressed concern that a funds transfer might be perceived as a
subaward to the Federal laboratory.
Response: We agree and made a change to the definition of ``Federal
financial assistance subject to the Transparency Act'' in that section
(which now is section 170.320) of the guidance. The definition of
``cooperative research and development agreement'' in 15 U.S.C. 3710a
excludes transactions under which Federal funds are provided to non-
Federal entities. It also distinguishes CRDAs, which are not Federal
financial assistance awards, from cooperative agreements under the
Federal Grant and Cooperative Agreement Act in 31 U.S.C., chapter 63.
Comment: One commenter noted that the proposed guidance did not
apply to a Federal agency that receives an award from another agency
and asked whether it would apply to an award that a Federal agency
receives from a non-Federal entity.
Response: Yes, the guidance applies. The non-Federal entity would
have to report the subaward. At this time, the
[[Page 55667]]
non-Federal entity would not have to report lower-tier subawards. To
clarify this, we revised the definition of ``entity'' in the award term
that now is in Appendix A to part 170.
Comment: One commenter stated that it acts as a fund manager
overseeing accounts for Federal agencies into which voluntary payments,
court-ordered settlements, fines, and other sources of funds are
deposited. It noted that the Federal agency specifies the entities to
whom funds from those accounts are obligated. The commenter asked if it
is the recipient in that case and the other entities are the
subrecipients, or if the entities to whom it awards the funds are the
prime recipients because the Federal agency makes the funding
decisions.
Response: If the funds cited in the comment are available for
obligation or reobligation for Federal program purposes, this situation
is somewhat similar to that of a grant under which the recipient is
authorized to: (1) Make loans for program purposes to subrecipients;
(2) merge the funds received from those subrecipients' loan payments
back into the corpus of grant funding; and (3) use those repaid funds
to make new loans. In both that case and the case raised by the
commenter, the non-Federal entity that manages Federal agency funds
that are available for program purposes is the recipient. The entities
that receive the funds that the recipient obligates or reobligates are
subrecipients.
Comment: One commenter suggested not applying the reporting
requirement below the first-tier of subawards under mandatory programs
such as block and formula grants and other types of assistance to
State, local, and tribal governments.
Response: The Transparency Act does not authorize a limitation on
the reporting requirement to the first-tier of subawards. At this time,
however, we are deferring to a later date the implementation of the
reporting requirement below the first-tier.
Comment: Six commenters asked whether the requirements in the
guidance applied to prior program announcements, awards, and subawards.
One of the commenters pointed out that an applicant who already had
applied in response to a previously issued announcement might have
decided not to apply if it had been informed about the Transparency Act
requirements prior to doing so. Others noted they would need to amend
previously issued awards if the requirements applied to them.
Response: New Federal, non-Recovery Act funded grant awards and
cooperative agreements with an award date on or after October 1, 2010,
and resulting first-tier subawards, are subject to the reporting
requirements in this guidance. New Federal grants and cooperative
agreements are grants and cooperative agreements with a new Federal
Award Identification Number (FAIN) as of October 1, 2010. They do not
include obligating actions on or after October 1, 2010, that provide
additional funding under continuing grants and cooperative agreements
awarded in prior fiscal years.
D. Other Comments
Comment: Two commenters raised questions about the dates in the
proposed paragraph 33.200(a)(2). One commenter asked what was meant by
the effective date of the part cited in paragraph (a)(2)(i). The other
commenter recommended changing the date in paragraph (a)(2)(ii). That
paragraph required a Federal agency to incorporate Transparency Act
requirements into a program announcement or other application
instructions if awards would be made after October 1, 2008, in response
to applications using those instructions. The commenter recommended
changing the date to December 31, 2008.
Response: The guidance in 2 CFR part 170 is effective today, with
its publication in the Federal Register. We revised the date in
paragraph 170.200(a)(2)(ii) to October 1, 2010.
Comment: Three commenters noted that some entities may want to take
advantage of the flexibility that the award term in the proposed
guidance gave a recipient to either: (1) Pass the responsibility for
reporting on lower-tier subawards to the subrecipients who made those
subawards; or (2) do that reporting itself, which would require the
recipient to collect the information from lower-tier subrecipients.
One, a State agency, stated that it maintains a complete data base that
should be sufficient to meet the Transparency Act requirements.
Response: We recognize the burdens associated with subaward
reporting and understand that programs and organizations differ.
However, prime recipients will not have the option to delegate
reporting of subgrant information to their subrecipients. We believe
that this may help reduce reporting burden on subaward recipients.
Comment: Six commenters asked for clarification on the meaning of
the phrases ``date of obligation'' and ``obligating action'' used in
the award term in the proposed section 33.220 with respect to
subawards. Two commenters asked how the date of obligation would be
defined for a subaward that allowed reimbursement of pre-award costs a
subrecipient incurred on or after a ``start date'' that was prior to
the date on which the subaward was signed.
Response: With respect to a subaward, an obligating action is a
transaction that makes available to the subrecipient a known amount of
funding for program purposes. Examples include a new subaward, an
incremental funding amendment that increases the total amount of a
subaward, or a quarterly allotment under a formula grant program.
We made no change to the guidance, since ``obligations'' is a well
established term in OMB's guidance on administrative requirements for
grants and agreements (2 CFR part 215 and the common rule that Federal
agencies adopted to implement OMB Circular A-102). Under most Federal
grants and cooperative agreements, recipients regularly report amounts
of ``unobligated balances'' to Federal agencies on the standard
financial reporting forms.
The date of obligation for a subaward is the date on which the
recipient authorizes the subrecipient to incur costs against the known
amount it obligates, and does so in a way that legally obliges the
recipient to provide funds to cover costs that are incurred in
accordance with the subaward's terms and conditions. That date usually
is associated with the signature of a formal document, either the
initial subaward or an amendment to it. That is distinct from the
``start date'' cited in the example of pre-award costs, since we assume
that the subrecipient incurs those costs at its own risk, in
anticipation of the subaward, and that the recipient has no legal
obligation--until it signs the subaward--to provide award funds to
cover those costs.
Comment: Eight commenters questioned whether the guidance required
reporting of obligations or disbursements as the award amounts. One
commenter recommended that recipients and subrecipients report
``expenditures,'' the term used in the Transparency Act. Four State
agencies asked how ``obligations'' would be determined in some programs
that adjust the amount a subrecipient receives at some time after the
initial obligation. One of the agencies cited the example of the school
lunch program, under which the amount obligated is not known until
after the subrecipient expends the funds.
Response: The guidance requires reporting of each obligation,
rather than each disbursement against the amount
[[Page 55668]]
obligated. If a recipient obligates a specific known amount for a
subaward, even if it may be adjusted later, it must report the
obligation when it is made. For a program like the school lunch
program, however, where the initial subaward provides the subrecipient
with an open-ended authorization of unspecified amount, the obligation
date corresponds to the date on which the amount of the obligation is
specified. Reporting is required by the end of the month following the
month in which the subaward obligation was made.
Comment: One commenter recommended revising the requirement to
report each obligating action within 30 days of the date of obligation.
The commenter suggested allowing reporting quarterly, semiannually, or
annually.
Response: We changed the guidance and award term to require
obligations to be reported no later than the end of the month following
the month of the obligation. For example, if a subaward is made on
October 2, 2010, the subaward information must be reported by no later
than November 30, 2010.
Comment: Ten commenters requested additional clarification about
the difference between a subaward, which must be reported under the
Transparency Act, and procurement under an award, which is not subject
to the reporting requirement.
Response: It is worth noting that recipients for many years have
had to judge whether a transaction under their Federal award was a
subaward or a procurement action. That is because a recipient must
include different requirements in a subaward than it does in a
procurement under an award, in accordance with the administrative
requirements in 2 CFR part 215 (OMB Circular A 110) or the common rule
implementing OMB Circular A 102. Also, when the transaction provides
funds to a for-profit entity, the recipient must properly take into
account whether the transaction would be more characteristic of a
vendor relationship than a subrecipient under ------.210 of OMB
Circular A-133. The judgments a recipient must make to decide whether a
lower tier agreement is a subaward or procurement for Transparency Act
reporting purposes are the same as the judgments it makes to establish
which terms and conditions to include in the agreement. Prime
recipients should refer to awarding agency supplemental guidance, if
any, in making such a determination.
Two examples may help clarify the distinction, which is based on
the purpose of the transaction between the recipient or subrecipient
and the entity at the next lower tier. If the purpose of the lower-tier
transaction is the same as the purpose of the substantive program
supported by the Federal award at the prime tier, so that the recipient
through that lower tier transaction is in effect handing a portion of
the substantive program over to the lower-tier entity for performance,
the lower-tier transaction is a subaward. The two examples follow:
Example 1: Provision of health services. A Federal program
provides funding to State agencies to deliver a variety of services for
older citizens. If the State provides funds to a third party to carry
out a type of service (e.g., mental health services) that is authorized
under the program and the State otherwise might deliver itself, the
agreement is a subaward because the third party is carrying out
substantive programmatic activity that is the purpose of the Federal
award. If a recipient or subrecipient obtains the services of a third
party to help in designing public service announcements or developing
educational materials about the program--goods or services that the
State or subrecipient needs to carry out the program that is the
purpose of the award--that would be a procurement under the award or
subaward.
Example 2: Research. An agency makes an award to a
university to investigate basic physics to understand why certain
materials have the properties they do. To do some of the experiments,
the university researchers need an instrument that does not yet exist.
The university provides funding under the Federal award to a small firm
to carry out a research and development project and develop an
instrument. The award to the firm has the purpose of instrument
development, and does not have the same purpose as the Federal award.
The award to the firm is a procurement action. If the university
instead made an award to the firm to perform some of the basic research
on physics of materials that is the substantive program purpose of the
Federal award, and the recipient determines it does not have a vendor
relationship with the firm under this award as described in Sec. --
--.210 of the attachment to OMB Circular A-133, the award to the firm
would be a subaward.
Comment: One commenter from a State agency said that it is unclear
whether Medicaid is considered Federal financial assistance for the
purposes of the subaward reporting requirement.
Response: There are no program exemptions under this guidance even
though there are other types of exemptions which are described in the
guidance. If a state makes a subaward under a grant or cooperative
agreement to an entity other than an individual who is a natural
person, the subaward is $25,000 or more, and no exemptions apply, the
state would need to report the subaward.
Comment: Three commenters raised issues with wording in the award
term in the proposed section 33.220 that related to the $25,000
reporting threshold for subawards. Two commenters asked for
clarification on the meaning of ``life of the subaward,'' as that
phrase was used, both in the award term and the associated guidance to
Federal agencies on use of the award term. Another commenter suggested
that readers might perceive ``$25,000 over the life of the subaward''
to be inconsistent with ``each action that obligates $25,000 or more in
Federal funding.'' One of the commenters also suggested consistent
wording to replace ``a total value of $25,000'' in one paragraph and
``in that range'' in another paragraph.
Response: With respect to the comment concerning the apparent
inconsistency between ``a total value of 25,000'' and ``each action
that obligates $25,000 or more in Federal funding,'' it should be noted
that the two phrases refer to related but different requirements
addressing lower-tier subaward reporting. We have revised the interim
final guidance to show that only recipient reporting of first-tier
subawards will be required at this time, and therefore, the comment is
no longer relevant. We have replaced the phrase ``life of the
subaward'' with alternative wording that more clearly specifies when a
recipient must include the Transparency Act reporting requirement in a
subaward it makes to a subrecipient. For new Federal grants or
cooperative agreements as of October 1, 2010, if the initial award is
$25,000 or more, reporting of subaward information is required. If the
initial award is below $25,000 but subsequent award modifications
result in a total award of $25,000 or more, the award is subject to the
reporting requirements, as of the date the award exceeds $25,000. If
the initial award is $25,000 or more, but funding is subsequently de-
obligated such that the total award amount falls below $25,000, the
award continues to be subject to the reporting requirements of the
Transparency Act.
Comment: One commenter asked for clarification concerning reporting
requirements for incrementally funded subawards. The commenter gave as
an example a subaward that a recipient expected to exceed $25,000 over
the duration of the subaward, but for which
[[Page 55669]]
the initial obligation was less than $25,000.
Response: Each action that obligates $25,000 or more in Federal
funds must be reported.
Comment: Three commenters asked whether a recipient or subrecipient
would be required to report a downward adjustment in the amount of a
subaward it had made previously.
Response: We made no change to the guidance. The award term that
now is in section Appendix A to part 170 of the guidance refers
recipients and subrecipients to the web site at which data submission
instructions will be posted. Those instructions will include the
specific data elements and their definitions that, as discussed in
Section I of this Federal Register notice, have been established
through a separate process under the Paperwork Reduction Act [75 FR
43165]. The instructions will address whether reporting of reductions
in subaward amounts, sometimes called ``deobligations,'' are a
subcategory of obligations to be reported.
Comment: One commenter asked about the requirement to submit
changed information other than subaward amounts, such as a change in
subrecipient information.
Response: If the information that was reported was correct at the
time it was reported and changed at a later date, there would be no
need to subsequently revise the information in previously submitted
reports. The updated information would be included in reports of
subsequent obligations under the same subaward, however.
That is distinct from a case in which a recipient later discovers
that information it reported was erroneous at the time it was reported.
Questions concerning error corrections in that case are being
considered by the interagency group developing the data elements and
information technology systems for subaward reporting. As discussed in
the response to the previous comment, the process for resolving those
issues will include an opportunity for public input.
Comment: Four commenters asked how one would report subawards to
recipients with multiple Federal funding sources. One commenter asked
if the amount of funding from each program listed in the Catalog of
Federal Domestic Assistance (CFDA) would need to be reported.
Response: Each action that obligates $25,000 or more in Federal
funding would need to be separately reported. For new Federal grants or
cooperative agreements as of October 1, 2010, if the initial award is
$25,000 or more, reporting of subaward information is required. If the
initial award is below $25,000 but subsequent award modifications
result in a total award of $25,000 or more, the award is subject to the
reporting requirements, as of the date the award exceeds $25,000. If
the initial award exceeds $25,000 but funding is subsequently de-
obligated such that the total award amount falls below $25,000, the
award continues to be subject to the reporting requirements of the
Transparency Act. If a single action obligates funding from multiple
programs, the data submitted for that action would include the CFDA
number for the program that is the predominant source of the Federal
funding. If a program's funding is obligated by a separate amendment to
the same subaward agreement that provides other programs' funding,
however, then the data reported for each amendment to the agreement
would include the CFDA number of the program that provided the funding
for that amendment.
Comment: One commenter asked whether, in light of the new reporting
requirements, a subrecipient would be subject to Federal audit
requirements if it received $500,000 or more either from a single
program or a combination of programs.
Response: The new reporting requirements under the Transparency Act
do not change the audit requirements in OMB Circular A-133, section --
--.200, that apply to a non-Federal entity that expends $500,000 or
more in ``federal awards'' (which the Circular defines to include
Federal financial assistance received indirectly through pass-through
entities).
III. Next Steps
Federal agencies that award Federal financial assistance subject to
the Transparency Act will implement the interim final guidance in 2 CFR
part 170 through their regulations, internal policy guidance to
awarding offices, program announcements and application instructions,
and the award term that now is in section Appendix A to part 170. The
General Services Administration has recently published in the Federal
Register with an opportunity for public comment the information
collections that provide the specific data elements required for
Transparency Act reporting of subawards and executive compensation [75
FR 43165]. The information collections will be modified as appropriate
in response to public comments and published with any other operational
guidelines before recipients begin reporting data on subawards.
List of Subjects in 2 CFR Part 170
Business and industry, Colleges and universities, Cooperative
agreements, Farmers, Federal aid programs, Grant programs, Grants
administration, Hospitals, Indians, Insurance, International
organizations, Loan programs, Nonprofit organizations, Reporting and
recordkeeping requirements, State and local governments, Subsidies.
Danny Werfel,
Controller.
Authority and Issuance
0
For the reasons set forth above, the Office of Management and Budget
amends 2 CFR chapter I by adding part 170 to read as follows:
PART 170--REPORTING SUBAWARD AND EXECUTIVE COMPENSATION INFORMATION
Sec.
Subpart A--General
170.100 Purposes of this part.
170.105 Types of awards to which this part applies.
170.110 Types of entities to which this part applies.
170.115 Deviations.
Subpart B--Policy
170.200 Requirements for program announcements, regulations, and
application instructions.
170.220 Award term
Subpart C--Definitions
170.300 Agency.
170.305 Award.
170.310 Entity.
170.315 Executive
170.320 Federal financial assistance subject to the Transparency
Act.
170.325 Subaward.
170.330 Total compensation.
Appendix A to Part 170--Award Term
Authority: Pub. L. 109-282; 31 U.S.C. 6102.
Subpart A--General
Sec. 170.100 Purposes of this part.
This part provides guidance to agencies to establish requirements
for recipients' reporting of information on subawards and executive
total compensation, as required by the Federal Funding Accountability
and Transparency Act of 2006 (Pub. L. 109-282), as amended by section
6202 of Public Law 110-252, hereafter referred to as ``the Transparency
Act''.
Sec. 170.105 Types of awards to which this part applies.
This part applies to an agency's grants, cooperative agreements,
loans,
[[Page 55670]]
and other forms of Federal financial assistance subject to the
Transparency Act, as defined in Sec. 170.320.
Sec. 170.110 Types of entities to which this part applies.
(a) General. Through an agency's implementation of the guidance in
this part, this part applies to all entities, other than those excepted
in paragraph (b) of this section, that--
(1) Apply for or receive agency awards; or
(2) Receive subawards under those awards.
(b) Exceptions. (1) None of the requirements in this part apply to
an individual who applies for or receives an award as a natural person
(i.e., unrelated to any business or non-profit organization he or she
may own or operate in his or her name).
(2) None of the requirements regarding reporting names and total
compensation of an entity's five most highly compensated executives
apply unless in the entity's preceding fiscal year, it received--
(i) 80 percent or more of its annual gross revenue in Federal
procurement contracts (and subcontracts) and Federal financial
assistance awards subject to the Transparency Act, as defined at Sec.
170.320 (and subawards); and
(ii) $25,000,000 or more in annual gross revenue from Federal
procurement contracts (and subcontracts) and Federal financial
assistance awards subject to the Transparency Act, as defined at Sec.
170.320; and
(3) The public does not have access to information about the
compensation of the senior executives through periodic reports filed
under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of
1986.
Sec. 170.115 Deviations.
Deviations from this part require the prior approval of the Office
of Management and Budget (OMB).
Subpart B--Policy
Sec. 170.200 Requirements for program announcements, regulations, and
application instructions.
(a) Each agency that makes awards of Federal financial assistance
subject to the Transparency Act must include the requirements described
in paragraph (b) of this section in each program announcement,
regulation, or other issuance containing instructions for applicants:
(1) Under which awards may be made that are subject to Transparency
Act reporting requirements; and
(2) That either:
(i) Is issued on or after the effective date of this part; or
(ii) Has application or plan due dates after October 1, 2010.
(b) The program announcement, regulation, or other issuance must
require each entity that applies and does not have an exception under
Sec. 170.110(b) to ensure they have the necessary processes and
systems in place to comply with the reporting requirements should they
receive funding.
(c) Federal agencies that obtain post-award data on subaward
obligations outside of this policy should take the necessary steps to
ensure that their recipients are not required, due to the combination
of agency-specific and Transparency Act reporting requirements, to
submit the same or similar data multiple times during a given reporting
period.
Sec. 170.220 Award term.
(a) To accomplish the purposes described in Sec. 170.100, an
agency must include the award term in Appendix A to this part in each
award to a non-Federal entity under which the total funding will
include $25,000 or more in Federal funding at any time during the
project or program period.
(b) An agency--
(1) Consistent with paragraph (a) of this section, is not required
to include the award term in Appendix A to this part if it determines
that there is no possibility that the total amount of Federal funding
under the award will equal or exceed $25,000. However, the agency must
subsequently amend the award to add the award term if changes in
circumstances increase the total Federal funding under the award to
$25,000 or more during the project or program period.
Subpart C--Definitions
Sec. 170.300 Agency.
Agency means a Federal agency as defined at 5 U.S.C. 551(1) and
further clarified by 5 U.S.C. 552(f).
Sec. 170.305 Award.
Award, for the purposes of this part, effective October 1, 2010,
means a grant or cooperative agreement. On future dates to be specified
by OMB in policy memoranda available at the OMB Web site, award also
will include other types of awards of Federal financial assistance
subject to the Transparency Act, as defined in Sec. 170.320.
Sec. 170.310 Entity.
Entity has the meaning given in 2 CFR part 25.
Sec. 170.315 Executive.
Executive means officers, managing partners, or any other employees
in management positions.
Sec. 170.320 Federal financial assistance subject to the Transparency
Act.
Federal financial assistance subject to the Transparency Act means
assistance that non-Federal entities described in Sec. 170.105 receive
or administer in the form of--
(a) Grants;
(b) Cooperative agreements (which does not include cooperative
research and development agreements pursuant to the Federal Technology
Transfer Act of 1986, as amended (15 U.S.C. 3710a));
(c) Loans;
(d) Loan guarantees;
(e) Subsidies;
(f) Insurance;
(g) Food commodities;
(h) Direct appropriations;
(i) Assessed and voluntary contributions; and
(j) Other financial assistance transactions that authorize the non-
Federal entities' expenditure of Federal funds.
(b) Does not include--
(1) Technical assistance, which provides services in lieu of money;
(2) A transfer of title to Federally owned property provided in
lieu of money, even if the award is called a grant;
(3) Any classified award; or
(4) Any award funded in whole or in part with Recovery funds, as
defined in section 1512 of the American Recovery and Reinvestment Act
of 2009 (Pub. L. 111-5).
Sec. 170.325 Subaward.
Subaward has the meaning given in paragraph e.3 of the award term
in Appendix A to this part.
170.330 Total compensation.
Total Compensation has the meaning given in paragraph e.5 of the
award term in Appendix A to this part.
Appendix A to Part 170--Award Term
I. Reporting Subawards and Executive Compensation.
a. Reporting of first-tier subawards.
1. Applicability. Unless you are exempt as provided in paragraph
d. of this award term, you must report each action that obligates
$25,000 or more in Federal funds that does not include Recovery
funds (as defined in section 1512(a)(2) of the American Recovery and
Reinvestment Act of 2009, Pub. L. 111-5) for a subaward to an entity
(see definitions in paragraph e. of this award term).
2. Where and when to report.
i. You must report each obligating action described in paragraph
a.1. of this award term to http://www.fsrs.gov.
[[Page 55671]]
ii. For subaward information, report no later than the end of
the month following the month in which the obligation was made. (For
example, if the obligation was made on November 7, 2010, the
obligation must be reported by no later than December 31, 2010.)
3. What to report. You must report the information about each
obligating action that the submission instructions posted at http://www.fsrs.gov specify.
b. Reporting Total Compensation of Recipient Executives.
1. Applicability and what to report. You must report total
compensation for each of your five most highly compensated
executives for the preceding completed fiscal year, if--
i. the total Federal funding authorized to date under this award
is $25,000 or more;
ii. in the preceding fiscal year, you received--
(A) 80 percent or more of your annual gross revenues from
Federal procurement contracts (and subcontracts) and Federal
financial assistance subject to the Transparency Act, as defined at
2 CFR 170.320 (and subawards); and
(B) $25,000,000 or more in annual gross revenues from Federal
procurement contracts (and subcontracts) and Federal financial
assistance subject to the Transparency Act, as defined at 2 CFR
170.320 (and subawards); and
iii. The public does not have access to information about the
compensation of the executives through periodic reports filed under
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code
of 1986. (To determine if the public has access to the compensation
information, see the U.S. Security and Exchange Commission total
compensation filings at http://www.sec.gov/answers/execomp.htm.)
2. Where and when to report. You must report executive total
compensation described in paragraph b.1. of this award term:
i. As part of your registration profile at http://www.ccr.gov.
ii. By the end of the month following the month in which this
award is made, and annually thereafter.
c. Reporting of Total Compensation of Subrecipient Executives.
1. Applicability and what to report. Unless you are exempt as
provided in paragraph d. of this award term, for each first-tier
subrecipient under this award, you shall report the names and total
compensation of each of the subrecipient's five most highly
compensated executives for the subrecipient's preceding completed
fiscal year, if--
i. in the subrecipient's preceding fiscal year, the subrecipient
received--
(A) 80 percent or more of its annual gross revenues from Federal
procurement contracts (and subcontracts) and Federal financial
assistance subject to the Transparency Act, as defined at 2 CFR
170.320 (and subawards); and
(B) $25,000,000 or more in annual gross revenues from Federal
procurement contracts (and subcontracts), and Federal financial
assistance subject to the Transparency Act (and subawards); and
ii. The public does not have access to information about the
compensation of the executives through periodic reports filed under
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code
of 1986. (To determine if the public has access to the compensation
information, see the U.S. Security and Exchange Commission total
compensation filings at http://www.sec.gov/answers/execomp.htm.)
2. Where and when to report. You must report subrecipient
executive total compensation described in paragraph c.1. of this
award term:
i. To the recipient.
ii. By the end of the month following the month during which you
make the subaward. For example, if a subaward is obligated on any
date during the month of October of a given year (i.e., between
October 1 and 31), you must report any required compensation
information of the subrecipient by November 30 of that year.
d. Exemptions
If, in the previous tax year, you had gross income, from all
sources, under $300,000, you are exempt from the requirements to
report:
i. Subawards,
and
ii. The total compensation of the five most highly compensated
executives of any subrecipient.
e. Definitions. For purposes of this award term:
1. Entity means all of the following, as defined in 2 CFR part
25:
i. A Governmental organization, which is a State, local
government, or Indian tribe;
ii. A foreign public entity;
iii. A domestic or foreign nonprofit organization;
iv. A domestic or foreign for-profit organization;
v. A Federal agency, but only as a subrecipient under an award
or subaward to a non-Federal entity.
2. Executive means officers, managing partners, or any other
employees in management positions.
3. Subaward:
i. This term means a legal instrument to provide support for the
performance of any portion of the substantive project or program for
which you received this award and that you as the recipient award to
an eligible subrecipient.
ii. The term does not include your procurement of property and
services needed to carry out the project or program (for further
explanation, see Sec. ---- .210 of the attachment to OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit
Organizations'').
iii. A subaward may be provided through any legal agreement,
including an agreement that you or a subrecipient considers a
contract.
4. Subrecipient means an entity that:
i. Receives a subaward from you (the recipient) under this
award; and
ii. Is accountable to you for the use of the Federal funds
provided by the subaward.
5. Total compensation means the cash and noncash dollar value
earned by the executive during the recipient's or subrecipient's
preceding fiscal year and includes the following (for more
information see 17 CFR 229.402(c)(2)):
i. Salary and bonus.
ii. Awards of stock, stock options, and stock appreciation
rights. Use the dollar amount recognized for financial statement
reporting purposes with respect to the fiscal year in accordance
with the Statement of Financial Accounting Standards No. 123
(Revised 2004) (FAS 123R), Shared Based Payments.
iii. Earnings for services under non-equity incentive plans.
This does not include group life, health, hospitalization or medical
reimbursement plans that do not discriminate in favor of executives,
and are available generally to all salaried employees.
iv. Change in pension value. This is the change in present value
of defined benefit and actuarial pension plans.
v. Above-market earnings on deferred compensation which is not
tax-qualified.
vi. Other compensation, if the aggregate value of all such other
compensation (e.g. severance, termination payments, value of life
insurance paid on behalf of the employee, perquisites or property)
for the executive exceeds $10,000.
[FR Doc. 2010-22705 Filed 9-13-10; 8:45 am]
BILLING CODE 3110-01-P