This guide serves as a compilation of the various laws, regulations, and other terms and conditions applicable to ARC grants. Grant recipients and subrecipients will especially find this useful as a primer for the management of federal grants. Applicants may also find this guide useful when applying for an ARC grant.

Although this guide provides information on various relevant laws and regulations for the convenience of those interested in ARC grants, it serves as a general guide only. It does not constitute terms and conditions of an ARC grant and is solely intended to inform. It is not comprehensive, and each grant recipient, subrecipient, or applicant must use their own discretion to interpret and apply this guidance to their own particular grant project. The application of a grant concept in this guide may vary depending on the individual circumstances. Further, this guide is a restatement of concepts applicable to federal grants. Grantees, subgrantees, and applicants should directly consult the source material (e.g., the ARC website or the Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, 2 CFR § 200, referred to as Uniform Guidance) for the most pertinent information. 

This version of the guide reflects the government-wide grant rules (Uniform Guidance) published as a final rule on April 22, 2024. These requirements apply to federal awards approved by the ARC Federal Co-Chair on or after June 21, 2024.

For federal awards approved before June 21, 2024, the Uniform Guidance in effect before the April 22, 2024 final rule will continue to apply. 

For additional information on grants management, please visit the website of the Council on Federal Financial Assistance at www.cfo.gov/coffa. The most recently updated version of the Uniform Guidance can be found at www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200.

Construction grants approved by ARC are administered by a federal or state agency on ARC’s behalf. These agencies have an agreement with ARC to administer the projects in accordance with their policies and procedures that implement ARC’s terms and conditions and the Uniform Guidance. This guide does not cover those policies and procedures, which are best gleaned from communications with the agency administering the ARC grant. 

ARC administers grants without significant construction activities (non-construction). For more information on the administration of ARC grants, see Chapter 2 – ARC Grants. 

This guide contains important terminology used throughout federal grant regulations and in ARC policies and procedures.

Recipients 

• A recipient is an entity that receives a federal award directly from a federal awarding agency to carry out an activity under a federal program. The term recipient does not include subrecipients or individuals that are participants or beneficiaries of the award. 
• ARC only provides federal awards to public entities and non-profits, so only these types of entities would be “recipients” of ARC awards (i.e. States, local governments, Indian Tribes, institutions of higher education and nonprofit organizations; see 2 CFR § 200.1 for definitions of these entities). It does not provide federal awards to for-profit organizations or individuals.

Subrecipients 

• A subrecipient is an entity that receives a subaward from a pass-through entity to carry out part of a federal award. The term does not include a beneficiary or participant under the federal award. See 2 CFR § 200.331 for help identifying a subrecipient.
• Generally, the terms and conditions of the ARC award flow down to subrecipients, including but not limited to the requirements of the Uniform Guidance. That means that subrecipients have to abide by these terms and conditions just like recipients do. Subrecipients and pass-through entities must have a subaward agreement in place to perform activities under the federal award. See 2 CFR § 200.332(b).
•  Subrecipients can receive award funds directly from a recipient or from a subrecipient. This is sometimes referred to as “tiers” of subrecipients. See 2 CFR Part 25 for Unique Entity Identifier rules applicable to tiers of subrecipients.

Pass-Through Entity 

• A pass-through entity is a recipient or subrecipient that provides a subaward to a subrecipient to carry out part of a federal program.
• Pass-through entities have special monitoring responsibilities under the Uniform Guidance. See 2 CFR § 200.332.

More information on the terms used in this guide is available within 2 CFR § 200.1 (the “Definitions” section of the Uniform Guidance). 

• The Uniform Guidance: https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200
• ARC Grantee Resources: https://www.arc.gov/grantee-resources 
• ARC Applicant Resources: https://www.arc.gov/applicant-resources/  
• ARC Code: https://www.arc.gov/wp-content/uploads/2023/10/THE-CODE-Oct-2023-Revision.pdf 
• ARC Project Guidelines: https://www.arc.gov/resource/arc-project-guidelines/
• Council on Federal Financial Assistance: https://www.cfo.gov/coffa/
• General federal grant information: http://www.grants.gov 

ARC awards are made for a specific period of time, known as the “period of performance” (sometimes also referred to as the “project period” or “award period”). The period of performance is the time during which project activities take place and award funds are made available. ARC state representatives and ARC staff work with each grant applicant to establish the appropriate period of performance, which will be approved in writing by ARC and form part of the grant agreement. 

Periods of performance typically range from one to three years, depending on what is appropriate for the project. Planning projects, for example, tend to necessitate a shorter period of performance than construction projects, which may take up to three years. In some cases, periods of performance may be extended if necessary to complete the project. However, the grantee must carefully choose the period of performance based upon the expected length of time needed to conduct project activities. Extensions are not guaranteed. See Chapter 13 – Project Revisions for more information. 

ARC grant award funds must be either obligated or expended within the period of performance. This means that the grant recipient or subrecipient has either already paid for something, or has placed an order for goods or services, entered into a contract or subaward, or completed another type of transaction that requires payment. See the definitions of “Expenditures” and “Financial obligations” in 2 CFR § 200.1.  

The last day a recipient or subrecipient may obligate or expend funds is the last day of the period of performance, unless otherwise approved by ARC. For example, if the period of performance is October 1, 2025 to September 30, 2027, the last day that financial obligations may be incurred or funds may be expended is September 30, 2027.

If the end of the period of performance is approaching and it appears more time is needed to expend or obligate award funds, the grantee should contact their ARC Project Coordinator or their basic agency, as applicable, for assistance.

Although all costs must be obligated or expended within the period of performance, as described above, it is not necessarily true that work can begin as soon as the period of performance starts. This especially important to note for construction projects, which may have to undergo environmental review, for example. Typically construction cannot begin until the environmental review is complete and the basic agency has provided permission for work to begin. Construction grantees should be sure to follow the instructions of their basic agency regarding when they can begin work.

As explained in the previous section, grant funds must be obligated or expended during the period of performance. If a recipient or subrecipient incurs costs outside of the period of performance—for example, prior to the start date of the grant period—those costs cannot be covered by the award funds. With this consideration in mind, grantees must work closely with their State Program Managers and ARC Project Coordinator to finalize the appropriate period of performance for the project. The applicable period of performance will be contained in the grant agreement, which the grantee should read carefully.

Caution about Starting Work before Project Approval
While grant proposals are still going through ARC’s review and approval process, applicants may wish to begin work on their ARC grant. This is often the case if approval has taken longer than the applicant has anticipated or the goals for the project are considered to be best achieved on a certain timeline. However, applicants are generally advised not to incur any costs before their proposal has been approved. This is because ARC cannot guarantee a proposal will be approved until the Federal Co-Chair has signed off on the project; any incurred costs would be at the applicant’s own risk, meaning if the project does not get approved the applicant would have to satisfy the financial obligation themselves. It is always best to stay in contact with the project’s State Program Manager to determine whether work should begin. For construction, renovation, and equipment projects, ARC rules prohibit a grantee or subrecipient from issuing a contract before ARC has approved the project, unless a State waives this requirement. See ARC Project Guidelines, Section 3.8.

For information on extending the period of performance, please see Chapter 13 – Project Revisions. 

Direct costs are costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.

Indirect costs are costs incurred for a common or joint purpose benefitting more than one cost objective and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. See 2 CFR § 200.1, “Indirect cost” and 2 CFR § 200.1, “Cost objective.” These are often described as overhead or administrative costs.

There is no universal rule for classifying certain costs as either direct or indirect under every accounting system. A cost may be direct with respect to some specific service or function, but indirect with respect to the federal award or other final cost objective. Therefore, it is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect cost in order to avoid possible double-charging of federal awards. See 2 CFR § 200.412. 

Determining Direct Costs 

The determining factor in distinguishing direct from indirect costs of federal awards is identification with the federal award rather than the nature of the goods and services involved. Typical costs charged directly to a federal award include the following:

• The compensation of employees who work on the grant project
• Those employees’ related fringe benefit costs
• The costs of materials purchased to achieve the award’s objectives

If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. Examples include extraordinary utility consumption, the cost of materials supplied from stock or services rendered by specialized facilities, cybersecurity, integrated data systems, asset management systems, performance management costs, program evaluation costs, or other institutional service operations.

The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs is appropriate only if certain conditions are met. See 2 CFR § 200.413(c) for those conditions.

For more guidelines on determining direct costs, see 2 CFR § 200.413.

Determining Indirect Costs 

When applying indirect costs to a grant award, recipients or subrecipients must either use an indirect cost rate negotiated with a cognizant federal agency (this would not be ARC, as ARC does not negotiate these rates with grantees); or the de minimis indirect cost rate, which is up to 15% of the grantee’s modified total direct costs (MTDC). No documentation is required to justify the 15% de minimis indirect cost rate and it may be used indefinitely. Once elected, the de minimis rate must be used consistently for all federal awards until the recipient or subrecipient receives a negotiated indirect cost rate.

The de minimis indirect cost rate may be up to 15% of the modified total direct cost (MTDC) base. A negotiated indirect cost rate may also be a percentage of the MTDC. The MTDC comprises the following: 

• All direct salaries and wages 
• Applicable fringe benefits 
• Materials and supplies
• Services
• Travel
• Up to the first $50,000 of each subaward (regardless of the period of performance of the subawards under the award)

MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. See 2 CFR § 200.1, “Modified Total Direct Cost (MTDC)”. 

Nonprofit Organizations: Because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as an indirect cost in all situations. Identification with a federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect costs of federal awards. However, typical examples of indirect costs for many nonprofit organizations may include the following: 

• Depreciation on buildings and equipment 
• Costs of operating and maintaining facilities 
• General administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting 

See 2 CFR § 200.414(b). 

Any direct cost of minor amount may be treated as an indirect cost for reasons of practicality where such accounting treatment for that item of cost is consistently applied to all federal and non-federal cost purposes. See 2 CFR § 200.413(d). 

For more guidelines on determining indirect costs, see 2 CFR § 200.414. 

Costs must meet the following general criteria in order to be allowable under federal awards:  

• Be necessary and reasonable for the performance of the federal award and be allocable to the award. See 2 CFR § 200.405 on allocable costs; 
• Conform to any limitations or exclusions set forth in the Uniform Guidance or in the ARC award as to types or amount of cost items;  
• Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the recipient or subrecipient; 
• Be accorded consistent treatment. For example, a cost must not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost;  
• Be determined in accordance with generally accepted accounting principles (GAAP) (except for state and local governments and Indian tribes, which are otherwise provided for in the Uniform Guidance); 
• Not be double-counted. ARC accepts other federal award costs as match for our grants, and our funds may be used as match for other federal grants, as permitted by the Appalachian Regional Development Act and as approved by the other federal agency. However, costs cannot be paid by the federal government twice, in a current or prior period. Every cost for which a recipient or subrecipient receives a reimbursement or advance must not have received a reimbursement or advance before;
• Be adequately documented. See also 2 CFR §§ 200.300 through 200.309; and
• Be incurred during the approved budget period (closeout costs are an exception). 

See 2 CFR § 200.403 and Subpart E.

Further, certain costs may not be allowable for particular ARC programs. For example, ARC’s INSPIRE program limits the allowability of construction and renovation costs. Applicants, recipients and subrecipients should inform themselves about allowable costs under the applicable ARC program (one way to do this is by reviewing the grant program’s Notice of Solicitation of Applications).

To be allowable, a cost must be necessary and reasonable for the performance of the federal award. A cost is reasonable if, in both its nature and amount, it does not exceed what a prudent person would incur under the circumstances prevailing at the time of the decision. To be prudent means to use caution and good judgment. Factors contributing to whether a cost is reasonable include the following:

• Whether the cost is of a type generally recognized as ordinary and necessary for the recipient’s or subrecipient’s operation or the proper and efficient performance of the federal award.
  • An example of a cost that is not necessary would include a cost that is duplicative of a resource the recipient or subrecipient already has. See 2 CFR § 200.318(d);

• The restraints or requirements imposed by such factors as sound business practices; arm’s-length bargaining; federal, state, local, tribal, and other laws and regulations; and terms and conditions of the federal award;  

• Market prices for comparable goods or services for the geographic area;
  • Prices for goods and services that greatly exceed achievable prices for the same or similar good or service in the market may be determined to be unreasonable, unless an adequate justification can be provided.

• Whether the individuals concerned acted with prudence under the circumstances considering their responsibilities to the recipient or subrecipient, its employees, its students or membership (if applicable), the public at large, and the federal government; and

• Whether the cost deviates from the recipient of the subrecipient’s written policies and procedures regarding the incurrence of costs. 

Whether a cost is reasonable may depend on the circumstances of the particular grant project. Regardless of the circumstances, recipients and subrecipients must be able to justify any cost (both its nature and amount) funded under the federal award. 

See 2 CFR § 200.404. 

A cost may be allocated to a federal award if the goods or services involved are chargeable or assignable to that federal award in accordance with relative benefits received. This standard is met if the cost meets any of the following criteria:  

• Is incurred specifically for the federal award;  
• Benefits both the federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or  
• Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the federal award in accordance with the principles in the Uniform Guidance.

When allocating direct costs: if a direct cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. 

See 2 CFR § 200.405. 

The reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the recipient may request prior written approval of ARC. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability as described under certain circumstances in the following sections of the Uniform Guidance: 

• § 200.306 Cost sharing;
• § 200.307 Program income;  
• § 200.308 Revision of budget and program plans;  
• § 200.333 Fixed amount subawards;  
• § 200.430 Compensation—personal services, paragraph (h);  
• § 200.431 Compensation—fringe benefits;  
• § 200.439 Equipment and other capital expenditures;  
• § 200.440 Exchange rates;  
• § 200.441 Fines, penalties, damages and other settlements;  
• § 200.442 Fund raising and investment management costs;  
• § 200.445 Goods or services for personal use;  
• § 200.447 Insurance and indemnification;  
• § 200.455 Organization costs;  

• § 200.458 Pre-award costs;  
• § 200.462 Rearrangement and reconversion costs; and
• § 200.475 Travel costs. 

For more information, please see Chapter 6 – Allowability of Specific Items of Cost and the links above. 

Payments made for costs determined to be unallowable either by ARC, the cognizant agency for indirect costs, or the pass-through entity must be refunded (including interest) to the federal government, as instructed by ARC or the pass-through entity. This applies both to direct and indirect costs. See 2 CFR § 200.410.

This chapter highlights common items of cost under ARC grant awards, with information about the general allowability of those items. At the end is a summary of items that are generally allowable, unallowable, and require prior approval. This chapter is not comprehensive; it is an overview that does not account for the circumstances of a particular ARC grant project. Please refer to Chapter 5 – Cost Principles, the cost principles in 2 CFR § 200, Subpart E, “Cost Principles,” and your ARC Project Coordinator or Basic Agency contact for questions regarding cost allowability. 

Advertising costs are the costs of advertising media and corollary administrative costs. Advertising media includes, but is not limited to, magazines, newspapers, radio and television, direct mail, exhibits, and electronic or computer transmittals. 

Costs of advertising and public relations designed solely to promote the grant recipient or subrecipient are unallowable. 

Generally, advertising costs are only allowable when they are for program outreach purposes necessary for the project (such as recruiting program participants); the recruitment of personnel under the award; the procurement of goods and services under the award; or the disposal of project scrap or surplus materials acquired under the award.  

Public relations costs are for activities to maintain the recipient or subrecipient’s image and/or foster positive understanding within the community. Generally, allowable costs are those that are specifically required for the project; communicate specific project activities or accomplishments with the public or press; or keep the public informed on matters of public concern, such as notices of funding opportunities. 

Gifts and Memorabilia 

Costs of promotional items and memorabilia that do not have a programmatic function, such as models, gifts, and souvenirs, are unallowable. However, items that may be promotional in nature but advance the grant project may be allowable. It is always best to review these items with the ARC Project Coordinator.

See 2 CFR § 200.421. 

Generally, direct costs for the acquisition of buildings or land require prior written approval from ARC. Approval should take place during the initial application review process, when ARC reviews the project with the applicant and approves the project scope. 

Rental Costs 

The rental cost of space in privately or publicly owned buildings used for the benefit of the project is an allowable cost subject to the conditions stated below: 

• Rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to determine if circumstances have changed and other options are available. See 2 CFR § 200.465(a) for more information on rental cost allowability. See also 2 CFR § 200.306(i)(3) for match valuation. 
• Costs of unused/idle facilities are only allowable under certain circumstances. “Idle facilities” means completely unused facilities that exceed the recipient’s or subrecipient’s current needs. Costs of idle facilities or idle capacity means maintenance, repair, housing, rent, and other related costs (for example, insurance, interest, and depreciation). See 2 CFR § 200.446, “Idle facilities and idle capacity.”

Utilities, Maintenance, Repair, and Other Property Costs  

• Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see 2 CFR § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. See 2 CFR § 200.452. 

Capital Expenditures

• Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs with the prior written approval of the Federal agency or pass-through entity.
• Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal awarding agency or pass-through entity.
• Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are allowable as a direct cost with the prior written approval of the federal awarding agency or pass-through entity. See 2 CFR § 200.439(b)(3).
• Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alterations costs incurred specifically for a federal award are allowable as a direct cost with the prior approval of the federal awarding agency or pass-through entity. Costs incurred in the restoration or rehabilitation of the recipient or subrecipient’s facilities to approximately the same condition existing immediately prior to commencement of federal awards, less costs related to normal wear and tear, are allowable. See 2 CFR § 200.462. 

Clothing is generally unallowable except when there is a clear programmatic purpose, and the clothing is reasonable and necessary for the completion of the project. An example may be found in the uniforms of security personnel, as set forth in 2 CFR § 200.457, “Plant and Security Costs.” 

Salaries, Wages, and Fringe Benefits 

Compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the federal award, including but not necessarily limited to wages and salaries. See 2 CFR § 200.430. Compensation for personal services may also include fringe benefits which are addressed in 2 CFR § 200.431. 

To be allowable, employee compensation must: 

• be reasonable for the services rendered; 
• conform to the established written policy of the recipient or subrecipient consistently applied to both federal and non-federal activities; 
• follow an appointment made in accordance with the recipient or subrecipient’s laws and/or rules or written policies and meet the requirements of the federal statute, where applicable; and 
• be determined and supported as provided in 2 CFR § 200.430(g). 

See 2 CFR § 200.430. 

The amount of employee compensation must also be reasonable. Compensation for employees engaged in work on federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the recipient or subrecipient. In cases where the kinds of employees required for federal awards are not found in the other activities of the recipient or subrecipient, compensation will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor market in which the recipient or subrecipient competes for the kind of employees involved.

Fringe benefits are allowances and services employers provide to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave, employee insurance, pensions, and unemployment benefits. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, an organization-employee agreement, or an established policy of the recipient or subrecipient.

Documentation for Salaries, Wages, and Fringe Benefits 

Charges to federal awards for salaries, wages, and fringe benefits must be based on records that accurately reflect the work performed and comply with the established policies and practices of the organization. See 2 CFR § 200.430 (especially 200.430(g)) and 2 CFR § 200.431. These records must: 

• Be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; 
• Be incorporated into the official records of the organization; 
• Reasonably reflect the total activity for which the employee is compensated by the organization; 

• Encompass both federally-funded and all other activities compensated by the organization on an integrated basis, but may include the use of subsidiary records as defined in the organization’s written policies; 
• Comply with the established accounting policies and practices of the organization; 
• Support the distribution of the employee’s salary or wages among cost activities, if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity;; 
• Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities.

See 2 CFR § 200.430 for more information on allowable salaries and wages and § 200.431 on allowable fringe benefit costs. 

A conference is defined as an event whose primary purpose is the dissemination of technical information beyond the recipient or subrecipient and is necessary and reasonable for successful performance under the federal award.

Allowable conference costs may include the rental of facilities, speakers’ fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the federal award. As needed, the costs of identifying and providing locally available dependent-care resources for participants are allowable as needed. Conference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary, and managed in a manner that minimizes costs to the federal award. 

See 2 CFR § 200.432. 

Advertising and public relations costs in connection with conferences, meetings, or other similar events may not be allowable, per 2 CFR § 200.421(e)(2). These include the following:  

• Costs of displays, demonstrations, and exhibits;  
• Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and  
• Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings. 

Please speak with your ARC Project Coordinator or Basic Agency contact with any questions. 

Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the recipient or subrecipient, are generally allowable when reasonable. To determine the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. Please see 2 CFR § 200.459 (b) for relevant factors. 

Costs of contributions and donations, including cash, property, and services, from the recipient or subrecipient to other entities, are unallowable. 

For the allowability of contributions and donations to the recipient or subrecipient, see 2 CFR § 200.434. 

Entertainment costs such as amusement, diversion, and social activities and any associated costs (such as gifts) are unallowable unless they have a specific and direct programmatic purpose and are included in the federal award.

Costs of prizes or challenges are allowable if they have a specific and direct programmatic purpose and are included in the federal award.

See 2 CFR § 200.438.

Equipment costs must be reasonable and necessary for the ARC grant project. To meet this standard, the following must be true: 

• No other equipment owned by the recipient/subrecipient is suitable for the project; and 
• Federal funds are not used to provide reimbursement for the purchase of equipment already owned by the recipient/subrecipient. 

Equipment and other capital expenditures are unallowable as indirect costs. If a grant recipient or subrecipient intends to regularly use equipment for activities other than the ARC grant, the cost should be appropriately divided among each activity. 

Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of ARC or the pass-through entity.  

See 2 CFR § 200.439 for more information and see 2 CFR § 200.1 for definitions of “capital expenditures,” “equipment,” and other terms found in 2 CFR § 200.439.

Computers and Other Computing Devices, Software, and Information Technology Systems 

Computing devices (generally computers and related accessories – see definition of “computing devices” in 2 CFR § 200.1) are allowable as direct costs if they are essential and allocable to the grant project, even if not solely dedicated to federal award. Software, firmware, support services and other parts of information technology systems (see § 200.1, “Information technology systems”) are also generally allowable. However, items like these that are categorized as equipment require prior written approval; those that are characterized as supplies do not. Usually ARC will provide approval of equipment purchases through the approval of the grant recipient’s initial project budget, but any proposed equipment purchases that arise after grant approval will require ARC or the Basic Agency’s written approval. See 2 CFR § 200.1 definitions of “equipment” and “supplies,” including 2 CFR § 200.439 and § 200.453.  

When procuring technology, be careful not to seek out a specific brand name unless federal procurement rules allow for that. Generally this is only allowable when technology is truly unique to only one brand and necessary for the grant project. (see Chapter 12 – Procurement and 2 CFR § 200.319(c)(6) for more information).

Please refer to Chapter 11 – Property Standards and Chapter 12 – Procurement for a more complete discussion of the requirements and restrictions for these costs. 

Fines and penalties are generally unallowable costs, except when incurred as a result of compliance with specific provisions of the ARC award or with prior written approval of ARC. See 2 CFR § 200.441. 

Costs of food and non-alcoholic beverages are generally allowable when they are reasonable and necessary for the grant project. Food and beverage as a reasonable conference/meeting cost or providing for subsistence costs may be allowable in certain instances (see 2 CFR §§ 200.432, 456, 475 and 476). If a food and beverage cost seems reasonable and necessary, please refer it to your ARC Project Coordinator or Basic Agency contact for review. 

Costs of alcoholic beverages are unallowable. See 2 CFR § 200.423. 

Fundraising costs for the purpose of meeting the ARC grant objectives are allowable with prior approval of ARC. However, when not for the purpose of achieving grant objectives, costs of organized fundraising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions are usually unallowable costs. See 2 CFR § 200.442.  

Costs for home office workspaces are generally unallowable. See 2 CFR § 200.465(c)(6) and (f). 

An honorarium is unallowable when its purpose is to confer distinction on, or to symbolize respect or esteem for, its recipient. However, payments for services rendered, such as a speaker’s fee, are allowable when reasonable and necessary for the performance of the grant award. 

Establishment or reorganization of an organization. Costs such as incorporation fees; brokers’ fees; fees to promoters, organizers, or management consultants; attorneys; accountants; or investment counselors, whether or not employees of the recipient or subrecipient in connection with establishment or reorganization of an organization, are unallowable except with prior approval of ARC.

Collective bargaining. Costs of any of the following activities are unallowable: activities undertaken to persuade employees of the recipient or subrecipient, or any other entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing.

Data and evaluation. Costs related to data and evaluation for program purposes are generally allowable. Data costs include (but are not limited to) the expenditures needed to gather, store, track, manage, analyze, disaggregate, secure, share, publish, or otherwise use data to administer or improve the program, such as data systems, personnel, data dashboards, cybersecurity, and related items. Data costs may also include direct or indirect costs associated with building integrated data systems—data systems that link individual-level data from multiple State and local government agencies for purposes of management, research, and evaluation. Evaluation costs include (but are not limited to) evidence reviews, evaluation planning and feasibility assessment, conducting evaluations, sharing evaluation results, and other personnel or materials costs related to the effective building and use of evidence and evaluation for program design, administration, or improvement.

See 2 CFR § 200.455.

Participant support costs are direct costs that support participants and their involvement in a federal award, such as stipends or subsistence allowances, travel allowances, registration fees , temporary dependent care, and per diem paid directly to or on behalf of participants. See 2 CFR § 200.1, “Participant support costs” and 2 CFR § 200.456. These are allowable with prior approval from ARC. However, the classification of items as participant support costs must be documented in the recipient’s or subrecipient’s written policies and procedures and treated consistently across all federal awards. 

Costs of goods or services for personal use of the recipient’s or subrecipient’s employees are unallowable regardless of whether the cost is reported as taxable income to the employees.  

Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances, and personal living expenses for the recipient’s or subrecipient’s employees are only allowable as direct costs and must be approved in advance by ARC. See 2 CFR § 200.445, “Goods or services for personal use.”

Program income is gross income earned by the recipient or subrecipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Examples include income from fees for services performed, the use or rental of real or personal property acquired under federal awards, the sale of commodities or items fabricated under a federal award, license fees, and royalties on patents and copyrights, and principal and interest on loans made with federal award funds. Interest earned on advances of federal funds is not program income. See 2 CFR § 200.1, “Program income,” for more details.

Recipients and subrecipients must receive prior approval from ARC to fund any costs with program income. Generally, program income may be used to meet match requirements, or to add or deduct from the federal award. See 2 CFR § 200.307. ARC will notify recipients if they are required to report program income earned after the period of performance.

Access to Capital Grants

ARC Access to Capital grants provide funding to capitalize debt and equity investment products, such as revolving loan funds (RLFs) and equity funds. 

For Access to Capital grants, program income typically includes but is not limited to the following: return on investments, loan interest, fees, penalties and interest caused by the borrower’s late payment, proceeds from the sale of collateral in excess of the unpaid balance of the original loan, and interest earned on cash balances held while awaiting relending or reinvestment. Program income must be added to the Access to Capital fund to expand lending or investment or cover reasonable and necessary administrative costs. Income added to the capital base may not be withdrawn, other than for the purposes stated above, without the prior written consent of ARC. See the Access to Capital Projects Application and Operating Guidelines. 

Proposal costs are the costs of preparing bids, proposals, or applications on potential federal and non-federal awards or projects, including the development of data necessary to support the non-Federal entity’s bids or proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as indirect costs and allocated currently to all activities of the recipient or subrecipient. No proposal costs of past accounting periods may be allocable to the current period. See 2 CFR § 200.460. 

Project costs for publication and printing, including distribution, promotion, and general handling of electronic or print media, are allowable. If these costs are not identifiable with a particular project or cost activity, the costs should be allocated as indirect costs to all benefiting activities of the organization. See 2 CFR § 200.461 for more information. 

Copyrights 

To the extent permitted by law, the recipient or subrecipient may copyright any work that is subject to copyright and was developed, or for which ownership was acquired, under a federal award. The federal awarding agency reserves a royalty-free, nonexclusive, and irrevocable right to reproduce, publish, or otherwise use the work for federal purposes, and to authorize others to do so. The federal government has the right to:  

1. Obtain, reproduce, publish, or otherwise use the data produced under a federal award; and  

2. Authorize others to receive, reproduce, publish, or otherwise use such data for federal purposes. See 2 CFR § 200.315. 

Costs of selling and marketing any products or services of the recipient or subrecipient are unallowable unless they are allowed under 2 CFR § 200.421 and are necessary to meet the requirements of the federal award. See 2 CFR § 200.467. 

Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the recipient or subrecipient. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the recipient or subrecipient’s non-federally-funded activities and in accordance with the recipient or subrecipient’s written travel reimbursement policies. Travel costs of officials covered by 2 CFR § 200.444 are allowable with the prior written approval of ARC or the pass-through entity when the costs are specifically related to the federal award.  

Costs incurred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, must be considered reasonable and otherwise allowable only to the extent such costs do not exceed charges normally allowed by the recipient or subrecipient in its regular operations as the result of the recipient or subrecipient’s written travel policy. In addition, if these costs are charged directly to the federal award, documentation must justify that:  

1. Participation of the individual is necessary to the federal award; and  

2. The costs are reasonable and consistent with the recipient or subrecipient’s established travel policy. 

In the absence of a travel policy, the recipient or subrecipient must follow the federal per diem rates established by GSA. See the “Per Diem Rates” section of the U.S. General Services Administration (GSA).  

See 2 CFR § 200.475 for more information about allowable travel costs, including commercial air travel. 

Vehicles are generally categorized as equipment (see above and 2 CFR § 200.1, “Equipment”).  

The acquisition of a vehicle should be justified in the grant proposal, in terms of its necessity for the project and the acquisition method being proposed (purchasing or leasing). If customizations are being requested, the need for those customizations should be explained in the proposal. Like any costs, vehicles must be reasonable and necessary for the project; luxury vehicles are unlikely to be approved by these standards. 

The following costs are usually unallowable, but may be allowable in certain circumstances. Please consult 2 CFR Part 200, Subpart E, “General Provisions for Selected Items of Cost” for more information. 

• Advertising and public relations solely to promote the grantee or subgrantee 
• Alcoholic beverages 

• Clothing 
• Entertainment 
• Fines and penalties, except when incurred as a result of compliance with specific provisions of an award or contract (2 CFR § 200.441) 
• Gifts and similar promotional items 
• Goods or services for personal use 
• Honoraria 
• Lobbying (2 CFR § 200.450) and membership fees to organizations whose primary activity is lobbying (2 CFR § 200.454(e)). 

Indirect costs are costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. Examples of indirect costs include organizational expenses such as utilities, insurance costs, accounting services, or legal services; salaries of administrative and clerical staff (see 2 CFR § 200.413(c); the costs of operating and maintaining facilities; and depreciation of buildings or equipment used in the organization. 

These types of expenses are often treated as indirect, and not direct, costs because of the difficulty associated with calculating the proportion of those costs that are allocable specifically to the grant program.  

Costs must be treated consistently as either direct or indirect costs to avoid double-charging of federal awards. See 2 CFR § 200.412 and 2 CFR § 200.414.  

In order to apply an indirect cost rate exceeding 15% of modified total direct costs, grantees must have an approved indirect cost rate negotiated with their cognizant federal agency (for example, the U.S. Department of Commerce or the U.S. Department of Labor.) ARC is not one of the agencies that approves indirect cost rate proposals or cost allocation plans. Requirements to develop and submit indirect cost rate proposals and cost allocation plans may be found in 2 CFR § 200.414. If a cognizant federal agency has approved an indirect cost rate or allocation plan, then ARC will accept the indirect cost rate or allocation plan as supporting documentation of a negotiated indirect cost rate, provided the rate or plan is current and otherwise allocable to the ARC project.

A recipient or subrecipient that has a federally negotiated indirect cost rate that has expired during the funding period must obtain a new approved rate as soon as possible and submit a copy to ARC or the pass-through entity. A recipient or subrecipient that has a current federally-negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years.

Recipients that do not have an approved federal indirect cost rate may elect to charge a de minimis rate of up to 15% of modified total direct costs (MTDC). The de minimis rate does not require documentation to justify its use and may be used indefinitely. When using this method, cost must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. Also, if this method is chosen then it must be used consistently for all federal awards until such time as an indirect cost rate is negotiated. See 2 CFR § 200.414(f). 

Regardless of the allocation method used by the organization, the following “direct cost” bases may be used as a distribution base: 

• Modified Total Direct Cost, or MTDC. This base includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. 
• Direct Salaries and Wages (May Include Direct Fringe Benefits). 

If a subrecipient has negotiated an indirect cost rate with the federal government, then that rate applies. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with 2 CFR § 200.405(d). 

If no approved federally negotiated rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: 

• The negotiated indirect cost rate between the pass-through entity and the subrecipient, which can be based on a prior negotiated rate between a different pass-through entity and the same subrecipient. In that case, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; or 
• The de minimis indirect cost rate. 

See 2 CFR § 200.332(b)(4).

A subaward is an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. (A “pass-through entity,” which provides a subaward to a subrecipient to carry out part of a federal program, can be either a grant recipient or another subrecipient themselves.) A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. However, payments to a contractor, beneficiary or participant in a federal program are not a subaward. See 2 CFR § 200.1, “Subaward” and “Pass-through entity.”  

ARC must approve the issuance of a subaward under your ARC grant. This is normally accomplished by the grant applicant identifying the need for a subaward in the original grant proposal or during the proposal review process prior to a grant agreement being issued. 

The pass-through entity is responsible for classifying the parties to their project as either subrecipients or contractors. The pass-through entity must make a case-by-case determination whether each agreement it makes for the disbursement of federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. Characteristics which support the classification of the party as a subrecipient include when the party: 

• Determines who is eligible to receive what federal assistance; 
• Has its performance measured in relation to whether objectives of the federal program were met; 
• Has responsibility for programmatic decision-making; 
• Is responsible for adhering to applicable program requirements under the federal award; and 
• Uses the federal funds to carry out a program for a public purpose specified in the authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. 

In contrast, a contract is for the purpose of obtaining goods and services for the pass-through entity’s own use and creates a procurement relationship with the contractor. Characteristics indicative of a procurement relationship include when the entity: 

• Provides the goods and services within normal business operations; 
• Provides similar goods or services to many different purchasers; 
• Normally operates in a competitive environment; 
• Provides goods or services that are ancillary to the operation of the federal program; and 
• Is not subject to the compliance requirements of the federal program as a result of the agreement, though similar requirements may apply for other reasons. 

All of the characteristics listed above may not be present in all cases, so the pass-through entity must use judgment when classifying each agreement as a subaward or a procurement contract. 

The impacts of this classification as either a subrecipient or contractor are significant. By way of example, the requirements of the Uniform Guidance apply to subrecipients, and the pass-through entity must ensure that they convey certain information to subrecipients and that they adequately monitor them for compliance with federal regulations, award terms and conditions, and other requirements. See 2 CFR § 200.332. By contrast, contractors must be procured in accordance with allowable methods in 2 CFR § 200.317-327, and contracts with them must contain the applicable contract provisions in the Uniform Guidance Appendix II.  

A grant recipient may not make a subaward to their first-tier subrecipient unless that subrecipient has obtained and provided to the recipient a unique entity identifier (UEI) number. Recipients must notify potential subrecipients of this requirement. Subrecipients can obtain this number by visiting SAM.gov. Subrecipients of subrecipients are not required to obtain a UEI.

Subrecipients can obtain a UEI by visiting SAM.gov. Subrecipients are not required to complete full SAM registration to obtain a UEI. See 2 CFR § 25.300. 

Further, pass-through entities must verify that their subrecipient is not excluded or disqualified. This can be done in the following ways:  

• Checking the SAM Exclusion list; 
• Collecting a certification from that person; or  
• Adding a clause or condition to the covered transaction with that person. See 2 CFR § 180.300. 

Pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the below information at the time of the subaward. If any of these data elements change or become known later, the pass-through entity must include the information in a subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the federal award and subaward. Required information includes the following:

• Subrecipient name (which must match the name associated with its unique entity identifier (UEI)); 
• Subrecipient’s UEI; 
• Federal award identification number (FAIN); 
• Federal award date (see the definition of “federal award date” in 2 CFR § 200.1); 
• Subaward period of performance start and end date; 
• Subaward budget period start and end date; 
• Amount of federal funds obligated in the subaward; 
• Total amount of federal funds obligated to the subrecipient by the pass-through entity including the current financial obligation; 
• Total amount of the federal award committed to the subrecipient by the pass-through entity; 
• Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); 
• Name of the federal awarding agency, pass-through entity, and contact information for the awarding official of the pass-through entity; 
• Assistance Listings Number and title (the pass-through entity must identify the dollar amount made available under each federal award and the Assistance Listings Number at the time of disbursement); 

• Identification of whether the award is for research and development (R&D); 
• Indirect cost rate for the federal award; 
• All requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations and the terms and conditions of the federal award; 
• Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to ARC including identification of required financial and/or performance reports; 
• Indirect cost rate to be used by the subrecipient (either a federally-approved rate, a rate negotiated between the pass-through entity and the subrecipient, or the de minimis indirect cost rate); 
• A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of 2 CFR Part 200; and 
• Appropriate terms and conditions concerning closeout of the subaward. 

See 2 CFR § 200.332(b).

All pass-through entities are required to monitor their subrecipients as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Both recipients and subrecipients must comply with the terms and conditions of federal awards. That is because the terms and conditions of federal awards, including the Uniform Guidance, generally “flow down” to subawards and subrecipients. See 2 CFR § 200.101(b)(1).

To determine appropriate monitoring procedures, the pass-through entity must evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward. The evaluation may include consideration of such factors as the following: 

• Subrecipient’s prior experience with the same or similar subawards; 
• Results of previous audits, including whether or not the subrecipient receives a Single Audit; 
• Whether the subrecipient has new personnel or a new or substantially changed systems; and 
• The extent and results of federal awarding agency monitoring (for example, if the subrecipient has also directly received an award from a federal agency). 

See 2 CFR § 200.332(c).

Depending upon the pass-through entity’s assessment of risk posed by the subrecipient, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals:  

• Providing subrecipients with training and technical assistance on program-related matters; and  
• Performing on-site reviews of the subrecipient’s program operations;  
• Arranging for agreed-upon-procedures engagements as described in 2 CFR § 200.425 (on audits). 

Whether through site visits or otherwise, the pass-through entity must be familiar enough with the subrecipient’s financial policies, procedures, and maintenance of financial data to know they are adequate to provide accurate financial reporting. This includes assurance that timesheets, invoices, contracts, and ledgers are being maintained and are sufficient to support the reporting. 

Subrecipient monitoring by the pass-through entity must include the following: 

• Reviewing financial and performance reports submitted by the subrecipient; 
• Ensuring the subrecipient takes corrective action on all significant developments that negatively affect the subaward, such as audit findings, site visits, and notification of adverse conditions impacting the subrecipient’s ability to meet the objectives of the subaward; 
• Issuing a management decision for applicable audit findings pertaining to the award (see below, and 2 CFR § 200.332(d) and § 200.521(c)); and 
• Resolving audit findings specifically related to the subaward.  

See 2 CFR § 200.332(e).

The pass-through entity must verify that every subrecipient is audited as required by Subpart F of the Uniform Guidance when it is expected that the subrecipient will expend $1 million or more during the subrecipient’s fiscal year in federal awards. See 2 CFR § 200.332(f), 2 CFR § 200.332(g) and 2 CFR § 200.501. The audit must be completed within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. See 2 CFR § 200.512. Upon receipt of the subrecipient audit, the pass-through entity needs to do the following:

• Evaluate the impact of any deficiencies on the grant project and the pass-through entity’s organization’s ability to comply with applicable federal regulations, 
• Issue a management decision for audit findings that relate to federal awards it makes to subrecipients within six months of acceptance of the subrecipient’s audit report (2 CFR § 200.521), and 
• Ensure that the subrecipient takes timely and appropriate corrective action on all deficiencies detected through the audit. 

If a subrecipient fails to comply with federal statutes, regulations, or the terms and conditions of a federal award, the pass-through entity may impose additional conditions, as described in 2 CFR § 200.208. However, if it is determined that noncompliance cannot be remedied by imposing additional conditions, the pass-through entity or the federal awarding agency may take one or more actions set forth in 2 CFR § 200.339. 

Federal regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. For information on debarment procedures, see 2 CFR Part 180.

Grant recipients awarded a new federal grant greater than or equal to $30,000 are subject to FFATA subaward reporting requirements. The grant recipient is required to file a FFATA subaward report by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. 

See FSRS.gov for more information. 

ARC requires award recipients to submit both financial and performance reports. These reports describe the status of the project funds, provide progress updates, and convey other pertinent information. The specific requirements, reporting periods, and submission deadlines should be identified in the grant agreement and in the grant’s terms and conditions, which may be found in grant manuals, project checklists, and other advisory documents provided by ARC or the Basic Agency administering the project. See ARC’s Grantee Resources page. For most non-construction grants, the standard reporting requirement is once every 120 days and a final report at closeout. Construction grantees must report at least semi-annually or more frequently as determined by the Basic Agency. However, other reporting requirements may exist for certain ARC grant programs (for example, ARC provides grants to local development districts for administrative purposes, for which the payment and reporting schedule differs). In addition, in the review and approval process for plans and applications, it is sometimes necessary for ARC to impose special or unique reporting requirements. These requirements may vary from award to award. 

Timely Report Submissions 

It is important that grantees submit their reports by the deadline specified in their grant agreement, as the submission of appropriate reports enables ARC to provide reimbursement for grant costs incurred. Additionally, submitted a report late can lead to an audit finding.

Further Information

For non-construction grantees, more information on how to complete reporting may be found in the Grant Administration Manual for ARC Non-Construction Grants. Construction grantees should consult their Basic Agency regarding required reporting.

The Federal Funding Accountability and Transparency Act of 2006 (FFATA) is a federal law requiring that information on federal awards (federal financial assistance and expenditures) be made available to the public via a single, searchable website: http://www.usaspending.gov. The FFATA Subaward Reporting System (FSRS), located at www.fsrs.gov, is the reporting tool Federal grant recipients use to capture and report subaward and executive compensation data regarding their first-tier subawards to meet the FFATA reporting requirements. The subaward information entered in FSRS is displayed on www.USASpending.gov. 

See 2 CFR Part 170, Appendix A (Reporting Subaward and Executive Compensation Information). Please also review 2 CFR § 200.331 (Subrecipient and Contractor Determinations) and Chapter 8 of this guide to ensure federal award subrecipients are correctly identified. 

Who must submit data? 

Grantees (called “prime award recipients” in this context) awarded a new federal award greater than or equal to $30,000, that have made subawards of at least $30,000 or more to subrecipient(s), must submit data. If the initial award is below $30,000 but subsequent award modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award reaches $30,000. If the initial award is equal to or greater than $30,000 but de-obligation of funding causes the total award amount to fall below $30,000, grant recipients will continue to be subject to the reporting requirements. 

Grantees with a total gross income of $300,000 or less in the previous tax year are exempted from FFATA subward and executive compensation reporting requirements.

What must be reported? 

FFATA reporting requirements include the following: 

• All subaward information must be reported by the federal recipient, as dictated by the FFATA Subaward Reporting System (FSRS), such as the following: 

• Name of entity receiving award 
• Amount of award 
• Funding agency 
• NAICS code for contracts / CFDA program number for grants 
• Program source 
• Award title descriptive of the purpose of the funding action 

• Location of the entity (including congressional district) 
• Place of performance (including congressional district) 
• Unique identifier of the entity and its parent; and 
• Total compensation and names of top five executives (same thresholds as for primes) 

• If the initial subaward is at least $30,000, the award recipient must report the subawards and the names and annual compensation of the subawardee’s five highest paid executives. 

How and when to report? 

The prime awardee is required to file a FFATA subaward report through the FFATA Subaward Reporting System (FSRS), located at www.fsrs.gov, by the end of the month following the month in which the grantee awards any subgrant greater than or equal to $30,000. 

Program income means gross income earned by the recipient or subrecipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Program income includes but is not limited to income from fees for services performed, the use or rental of real or personal property acquired under a federal award, the sale of commodities or items fabricated under a federal award, license fees and royalties on patents and copyrights, and interest on loans made with federal award funds. See 2 CFR § 200.1 (definition of “Program Income”). Interest earned on advances of Federal funds is not program income. See 2 CFR § 200.307(a). 

Examples of program income may include registration fees, membership fees, ticket sales service fees, sale of commodities, or usage or rental fees. Proceeds from the sale of federal award-funded real property, equipment, and supplies do not constitute program income and should be treated in accordance with the requirements of 2 CFR §§ 200.311, 200.313 and 200.314. See also Chapter 11 – Property Standards. 

Grantees must provide an estimate of anticipated program income on the SF-424A (non-construction) and SF-424C (construction) budget forms. Once the grant project is under way, any grant-related income must be reported to ARC in the progress and final reports required under grant terms and conditions. 

Recipients may use program income in one of three ways: 

• To add to the total allowable costs of the project (addition method). In this method, ARC approves the use of program income to fund additional project costs that help achieve the grant project objectives. 
• To reduce the federal award (deduction method). In this method, ARC approves the use of program income to fund some existing budget costs, thereby reducing the total federal award.  
• To meet match requirements. In this method, ARC approves the use of program income to count toward the match requirement of the award. This may help to satisfy the required match amount or may reduce the need for match from other sources. 

See 2 CFR § 200.307(b). 

Recipients must reach out to ARC for prior approval regarding how program income may be used. Approval must be received from ARC prior to expenditure of the income. If a grantee identifies program income in the initial SF-424A or SF-424C budget forms, this approval can be obtained from the ARC Project Coordinator during the ARC review process, before the grant is awarded. If a grantee identifies program income after the grant has been awarded, they must reach out to their ARC Project Coordinator (non-construction) or basic agency (construction) as soon as possible to obtain approval for its use. To the extent available, program income must be spent prior to requesting additional cash payments from ARC. See 2 CFR § 200.305(b)(5). 

If authorized by ARC, costs incidental to the generation of program income that have not been charged to the federal award may be deducted from gross income to determine program income. See 2 CFR § 200.307(d).

Unless instructed otherwise by ARC, ARC does not impose any requirements on the use or reporting of program income earned after the period of performance has ended. 

For auditing purposes, Access to Capital grant recipients and subrecipients must track program income. Program income typically includes but is not limited to the following: return on investments, loan interest, fees, penalties and interest caused by the borrower’s late payment, proceeds from the sale of collateral in excess of the unpaid balance of the original loan, and interest earned on cash balances held while awaiting relending or reinvestment. 

Program income must be added to the fund to expand lending or investment or cover reasonable and necessary administrative costs. Income added to the capital base may not be withdrawn, other than for the purposes stated above, without the prior written consent of ARC. 

Access to Capital recipients and/or subrecipients should consult ARC’s Access to Capital Projects Application and Operating Guidelines for more information on the use and reporting of program income. 

The Uniform Guidance provides rules regarding the acquisition, use, management, and disposition of all these types of property:

• Land and buildings, including land improvements, structures, and appurtenances, but not moveable machinery. These types of property are referred to as “real property”.
•  Tangible property other than real property (e.g., equipment or supplies) and intangible property (e.g., trademarks, copyrights, patents, and loans). These are referred to as “personal property”. See 2 CFR § 200.1.

Rules are summarized below.

Ownership of Real Property 

If real property is acquired or improved (renovated) under a federal award, the recipient or subrecipient that acquires the title to the property has a conditional title. This is because that recipient and applicable subrecipient must abide by certain conditions regarding the use, encumbrances, and disposition of the property. To record this conditional title, ARC requires that the property owner file a notice of federal interest for any real property acquired or improved using ARC funds. This notice should properly describe ARC’s interest in the property. Grantees should consult with their Basic Agency representative about the process for filing a notice of federal interest for real property.

Use of Real Property 

Real property must be used for the purposes approved for the grant project, as long as needed for those purposes; during this time, the recipient and/or subrecipient must not dispose of the property, encumber its title or give anyone else an interest in the property. This means that a grant recipient and/or subrecipient cannot transfer the property’s title to someone else or give someone else a legal right to use or own the property without prior approval from ARC.

Insurance

Recipients and subrecipients must provide, at a minimum, the equivalent insurance coverage for real property acquired and improved with federal funds as provided to property owned by the recipient or subrecipient. See 2 CFR § 200.310.

Disposition of Real Property 

When real property is no longer needed for the grant purposes as approved by ARC, the recipient must reach out to their Basic Agency and ARC to obtain instructions regarding how they may dissolve any remaining interest of the federal government in the property (this is called “disposition”). The disposition instructions will provide for one of the following three options:

1. The recipient or subrecipient may retain their title without conditions by compensating the federal government for its interest in the property. The amount that the recipient or subrecipient must pay to the federal government would be equal to the federal government’s percentage of participation in the cost of the original purchase (and costs of any improvements), applied to the current fair market value of the property. Please note that if ARC and another federal awarding agency contributed funds for the original purchase, both would have to be compensated in accordance with their applicable percentage contribution.  

2. The recipient or subrecipient may sell the property and compensate the federal government accordingly. The amount that would be due to the federal government would be calculated by applying the federal government’s percentage of participation in the cost of the original purchase (and cost of any improvements) to the proceeds of the sale after deducting any actual and reasonable selling and fixing-up expenses. When the recipient or subrecipient sells the property, though, they must use sales procedures that provide for competition, resulting in the highest possible return.

3. The recipient or subrecipient may transfer their title to the federal government or to a third party designated/approved by ARC (and approved by any other federal agency involved in the project). The recipient or subrecipient would be compensated an amount calculated by applying the recipient or subrecipient’s percentage of participation in the purchase of the real property (and cost of any improvements) to the current fair market value of the property. 

Further Information on Real Property Requirements 

For more information, grantees should contact their Basic Agency regarding use, disposition and any other real property requirements. 

“Equipment” is tangible personal property (including information technology systems) having 1) a useful life of more than one year and 2) a per-unit acquisition cost of $10,000 or greater (or the organization’s capitalization policy, if it is less than $10,000). Computing devices only need to meet the second criterion to be equipment. 

“Supplies” are all other items of tangible personal property that are not equipment. This includes computing devices that cost less than $10,000 per unit (or the organization’s capitalization threshold, if that is less than $10,000), regardless of their useful life.

See the definitions of “equipment”, “supplies”, “information technology systems” and “computing devices” in 2 CFR § 200.1 for more information.

The legal right of ownership and conditions for use, management, and disposal of equipment are described below (and see 2 CFR § 200.313). 

Ownership of Equipment 

Title to equipment acquired under an ARC award will be held by the recipient or subrecipient; however, it is a conditional title. That means that the recipient or subrecipient with title to the equipment must adhere to certain conditions regarding the use, encumbrances, and disposition of the property.

To record this conditional title, ARC requires that the recipient or subrecipient file a notice of federal interest when ARC has contributed an amount toward the purchase of the equipment that exceeds the Simplified Acquisition Threshold (currently $250,000; see 2 CFR § 200.1, “Simplified acquisition threshold”). In other words, if ARC has contributed $250,000 or less toward the purchase, a notice of federal interest does not need to be filed; if the contribution was $251,001 or more, it does.  

Use of Equipment 

States and Indian Tribes must use equipment acquired under a federal award in accordance with their own laws and procedures. Recipients and subrecipients other than States and Indian Tribes must use the equipment acquired under an award for grant program purposes as long as needed for those purposes, even if the grant award has already been closed out. The recipient or subrecipient must not encumber the property without the prior approval of ARC. The equipment may be used for other federal projects, subject to the guidelines in 2 CFR § 200.313(c).

User fees. If appropriate, recipients or subrecipients may charge fees to third parties to use the equipment; the fees would be treated as program income to the project. See Chapter 10 “Program Income” and 2 CFR § 200.307.

Services for a fee. As long as the federal government retains an interest in the equipment, recipients or subrecipients may only use equipment acquired with a federal award to provide services for a fee amounting to at least what private companies charge for equivalent services. See 2 CFR § 200.313(c)(3). 

Replacement equipment. When acquiring replacement equipment, recipients or subrecipients may use the equipment to be replaced as a trade-in, or may sell the equipment and use the proceeds to offset the cost of the replacement equipment. 

Encumbrances. A recipient or subrecipient must not encumber equipment acquired under an ARC award without prior approval of ARC. 

Management of Equipment 

States and Indian Tribes must manage equipment acquired under a federal award in accordance with their own laws and procedures. 

Until disposition takes place, recipients or subrecipients other than States or Indian Tribes must use procedures for managing equipment (including replacement equipment) that, at a minimum, meet the following requirements: 

• Property records must be maintained that include all of the following information: 

• Description of the property 

• Serial number or other identification number 
• Source of funding for the property, including the federal award identification number (FAIN) 
• Identification of the title holder 
• Acquisition date 
• Cost of the property 
• Percentage of federal participation in the cost of the property 
• Location of the property 
• Use and condition of the property 
• Disposition data, including the date of disposal and sale price 

• Inventory. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. 
• Control system. A control system must be in place with adequate safeguards to prevent loss, damage, and theft. Any loss, damage, or theft must be investigated. 
• Maintenance procedures. Adequate maintenance procedures must be established and used to keep the property in proper working condition. 
• Insurance. At a minimum, provide the equivalent insurance coverage for equipment acquired with federal funds as provided to property owned by the recipient or subrecipient. See 2 CFR § 200.310. 
• Proper sales procedures. If authorized or required to sell the property, the recipient or subrecipient must establish and follow proper sales procedures to ensure the highest possible return. 

Disposition of Equipment 

States and Indian Tribes must dispose of equipment acquired under the award in accordance with their own laws and procedures.

Recipients and subrecipients other than States or Indian Tribes must request disposition instructions from ARC when original or replacement equipment acquired under the award or subaward is no longer needed for the original project, or for other activities currently or previously supported by a federal awarding agency.

Disposition of the equipment will be made as follows:

Current fair market value (FMV) of $10,000 or less. Items of equipment with a current per unit fair market value of $10,000 or less may be retained, sold, or otherwise disposed of with no further responsibility to ARC.

Current FMV of more than $10,000. If the item has a current per-unit fair market value of more than $10,000, the item may be retained or sold. If sold, the federal government is entitled to an amount calculated by multiplying the current market value or proceeds from sale by the federal awarding agency’s percentage of participation in the cost of the original purchase. ARC may permit the recipient or subrecipient to deduct and retain from the federal share $1,000 or 10% of the proceeds, whichever is less, for its selling and handling expenses.

If the recipient or subrecipient desires to transfer title of the equipment to a third party, the recipient or subrecipient must also reach out to ARC for disposition instructions.

Supplies are all other items of tangible personal property that are not equipment. This includes computing devices that cost less than $105,000 per unit (or the organization’s capitalization threshold, if that is less than $105,000). Please see 2 CFR § 200.314 for more information on the use and disposition of supplies.

The “Procurement Standards” of the Uniform Guidance (2 CFR § 200.317-327) describe applicable requirements when grantees and subrecipients purchase goods and services using federal award funds. These Procurement Standards apply in their entirety to most award recipients and subrecipients, except States and Indian Tribes, for which only some of the Procurement Standards apply. 

“States” are defined in the Uniform Guidance as any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and any agency or instrumentality thereof exclusive of local governments. See 2 CFR § 200.1, “State.” Local government entities such as counties, cities, towns, local public authorities, school districts and councils of governments (such as local development districts) are not States under this definition. See 2 CFR § 200.1 “Local government.” ARC defers to the non-Federal entity to determine whether it is a State entity under the Uniform Guidance. Most of ARC’s grantees and subrecipients are not State entities.

“Indian Tribes” are defined as any Indian Tribe, band, nation, or other organized group or community, including any Alaska Native village or regional or village corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. Chapter 33), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. See 25 U.S.C. 5304(e) and 2 CFR § 200.1 “Indian Tribe”.

When procuring property and services under a federal award, States and Indian Tribes must follow the same policies and procedures it they uses for procurements from their non-federal funds (2 CFR § 200.317), if these policies and procedures exist. However, States and Indian Tribes must also comply with 2 CFR §§ 200.321 and 322, as required for all award recipients and subrecipients. Section 200.321 requires recipients and subrecipients to take all necessary affirmative steps to assure that minority businesses, veteran-owned businesses, women’s business enterprises, and labor surplus area firms are used when possible. Section 200.322 requires that, as appropriate and to the extent consistent with law, the recipient or subrecipient should, to the greatest extent practicable under a federal award, provide a preference for the purchase, acquisition, or use of goods, products, or materials produced in the United States (including but not limited to iron, aluminum, steel, cement, and other manufactured products). They must also comply with the requirements of the Build America, Buy America Act. The requirements of § 200.322 must be included in all subawards, contracts and purchase orders for work or products under the federal award. Certain state agencies must also comply with 2 CFR § 200.323, requiring the procurement of items with “recovered materials.” States and Indian Tribes must also ensure that every purchase order or other contract includes any clauses required by 2 CFR § 200.327 and 2 CFR § Appendix II (“Contract Provisions for Non-Federal Entity Contracts Under Federal Awards”). Other than these provisions of the Uniform Guidance, the State or Indian Tribe must refer to its policies and procedures used for procurement with non-federal funds to govern its procurement actions.

If a State or Indian Tribe has not adopted procurement policies and procedures, they must follow all of the Uniform Guidance Procurement Standards.

The principles described in this section apply to all award recipients or sub recipients that are not States or Indian Tribes under the Uniform Guidance. These include non-profit organizations, most institutions of higher education, local government entities and local development districts. The principles in this section are contained throughout the Procurement Standards, 2 CFR § 318-327. 

Documented procurement policies and procedures 

For procurement transactions using federal award funds, the recipient or subrecipient must have and use documented procurement procedures consistent with applicable state, local, and tribal laws and regulations, and with the Procurement Standards at 2 CFR § 318-327. The recipient or subrecipient should periodically review these procedures to ensure compliance with applicable laws and regulations.  

Conflicts of interest and contractor performance 

Recipients and subrecipients must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. These must comply with 2 CFR § 200.318 (c) and the ARC Code Section 8.3. Please note that no employee, officer, agent, or board member with a real or apparent conflict of interest may participate in the selection, award, or administration of a contract supported by the federal award.

Recipients and subrecipients must also ensure that contractors perform in accordance with the terms and conditions of their contracts. Contracts must only be awarded to responsible contractors possessing the ability to perform successfully under the terms and conditions of proposed procurements. Consideration should be given to matters such as contractor integrity, compliance with public policy, proper classification of employees under the Fair Labor Standards Act, record of past performance, and financial and technical resources, including the contractor’s status on the SAM.gov exclusion list. See 2 CFR 200.318 and 2 CFR § 200.214. The recipient or subrecipient must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.

Recipients and subrecipients alone are responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of the procurement. These issues include, but are not limited to, source evaluation, protests, disputes, and claims. ARC will not substitute its judgment for that of the recipient or subrecipient unless the matter is primarily a federal awarding agency concern. 

Recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. The regulations in 2 CFR Part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. 

Avoid unnecessary or duplicative items 

Recipients and subrecipients’ procedures must avoid acquisition of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, a lease versus purchase analysis should be performed as well as other appropriate analysis for determining the most economical method for obtaining goods or services. 

Procurement Standards Requirements in 2 CFR §§ 200.321, 200.322, Appendix II  

As also required for States and Indian Tribes, other types of award entities must comply with 2 CFR § 200.321, requiring recipients and subrecipients to take all necessary affirmative steps to assure that minority businesses, veteran-owned businesses, women’s business enterprises, and labor surplus area firms are used when possible; and 2 CFR § 200.322, stating that, as appropriate and to the extent consistent with law, the recipient and subrecipient should, to the greatest extent practicable under a federal award, provide a preference for the purchase, acquisition, or use of goods, products, or materials produced in the United States (including but not limited to iron, aluminum, steel, cement, and other manufactured products). The recipient and subrecipient must also comply with the Build America, Buy America Act, as applicable. The requirements of § 200.322 must be included in all subawards, contracts and purchase orders for work or products under this award. Recipients and subrecipients must include any applicable provisions found at 2 CFR Part 200, Appendix II (“Contract Provisions for Non-Federal Entity Contracts Under Federal Awards”), in all contracts under the federal grant award. 

Methods of Procurement 

Goods and services may be procured under a federal award in accordance with the procurement methods set forth in 2 CFR § 200.320. Recipients and subrecipients should review this section carefully (and consult the “Procurement Claw” provided by the Chief Financial Officers Council) to ensure that their documented procurement policies and procedures meet the standards prescribed therein. Once documented, recipients and subrecipients must follow these documented policies and procedures.  

Procurement methods: 

• Informal
  • Micro-purchases (see 2 CFR § 200.320(a)(1))
  • Simplified acquisitions (formerly called “small purchases”) (see 2 CFR § 200.320(a)(2))

• Formal
  • Sealed bids (see 2 CFR § 200.320(b)(1))
  • Proposals (see 2 CFR § 200.320(b)(2))

• Noncompetitive (sometimes called “sole source”) (see 2 CFR § 200.320(c)). 

The allowable procurement method is based on the aggregate cost of the procurement transaction, as opposed to the cost of an individual good or service being procured. 

Competition 

Recipients and subrecipients must conduct all procurement transactions in a manner providing full and open competition consistent with the Procurement Standards in the Uniform Guidance. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, and invitations for bids or requests for proposals must be excluded from competing for such procurements. 

Some of the situations considered to be restrictive of competition include but are not limited to the following: 

• Placing unreasonable requirements on firms in order for them to qualify to do business; 
• Requiring unnecessary experience or excessive bonding; 
• Noncompetitive pricing practices between firms or between affiliated companies; 
• Noncompetitive contracts to consultants that are on retainer contracts; 
• Organizational conflicts of interest; 
• Specifying a brand name product instead of allowing an equal product to be offered and describing the performance or other relevant requirements of the procurement; and 
• Any arbitrary action in the procurement process. 

Written procedures for procurement transactions must ensure that all solicitations incorporate a clear and accurate description of the technical requirements of the material, product, or service to be procured. Solicitations should also identify all requirements which offerors must fulfill and all other factors to be used in evaluating bids and proposals. 

See 2 CFR § 200.319. 

Noncompetitive Procurement 

Recipients and subrecipients may use noncompetitive procurement (otherwise known as “sole source”) when one or more of the following circumstances apply: 

• The aggregate dollar amount of the property or services to be acquired does not exceed the micro-purchase threshold;  
• The item or service is available only from a single source; 
• The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 
• ARC or the pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the recipient or subrecipient; or 
• After solicitation from a number of sources, competition is determined to be inadequate. 

See 2 CFR § 200.320(c). 

ARC may provide written authorization to conduct a noncompetitive procurement in exceptional and rare circumstances, if: 1) the circumstances do not already meet the above criteria for a noncompetitive procurement, and 2) ARC nonetheless considers that the circumstances justify a noncompetitive procurement. If a grantee wishes to receive authorization from ARC to engage in a noncompetitive procurement, the grantee should reach out to their Basic Agency contact (for construction projects) or their ARC Project Coordinator (for non-construction projects) with a detailed explanation of the circumstances and the justification for the procurement. Please note that requesting written authorization from ARC for a noncompetitive procurement is not necessary when the good or service already meets any of the other criteria above justifying a noncompetitive procurement.

Non-construction grantees must request prior approval from ARC for certain revisions of grant activities. These include extensions to the period of performance, scope changes, and certain budgetary revisions. Any request for such a revision must be submitted to the grant’s Project Coordinator for approval. When ARC approves a grant project revision, it will become part of the project record. 

The following sections describe situations in which recipients must request prior approval from ARC for a modification of grant activities or the grant award. Additional information may be found in the Grant Administration Manual for ARC Non-Construction Grants and by discussing with the ARC Project Coordinator.

For non-construction awards, recipients must request ARC’s prior approval, and subrecipients from their pass-through entity, for changes including, but not limited to, the following: 

• Requesting additional federal funds needed to complete the project;
• Changing the scope or the objective of the grant project (even if there is no associated budget revision requiring prior written approval); 
• Changing the period of performance; 
• Changing a key person (including employers and contractors) engaged under the federal award; 
• Permitting the approved project director or other key personnel to disengage from the project for more than three months, or reduce time devoted to the project by 25% or more; 
• Adding costs requiring prior approval under 2 CFR § 200.407 that had not previously been approved by ARC; 
• Transferring funds budgeted for participant support costs as defined in 2 CFR § 200.1, “Participant Support Costs,” to other categories of expense; 
• New subawards or contracts (changing the recipient of an approved subward or contract does not generally require prior approval from ARC, unless otherwise specified by ARC); 
• Significantly changing the approved match (source(s) or amount); and
• Budget modifications, when the proposed cumulative change (meaning, the total change since the original budget was approved) is greater than 10% of the total project budget, including award and cost share, and the federal award is more than $250,000. See 2 CFR § 200.308(i).

See 2 CFR § 200.308.  

Questions about whether a project change is considered a revision requiring prior approval from ARC, including questions about scope changes, should be directed to the ARC Project Coordinator. 

Grant recipients must receive prior approval from ARC for some costs, as specified in 2 CFR Part 200 (specifically in 2 CFR § 200.407) and as discussed in Chapter 6 – Allowability of Specific Items of Cost. 

Recipients may request a period of performance extension to receive additional time when needed to achieve the goals and objectives of the grant program.  All extension requests should be submitted to the ARC Project Coordinator and will be evaluated on a case-by-case basis. If approved, the Project Coordinator will initiate an extension in ARC’s grants management system. 

Construction grantees must request prior approval from their administering state Basic Agency (RSBA) or federal Basic Agency (BA) for revisions of grant activities. ARC construction projects administered by a Basic Agency are administered in accordance with that Agency’s agreement with ARC. As such, grant revision requirements, such as how and when project revisions should be requested, will be provided by that Agency. ARC requires these Agencies to seek prior approval from the Commission for certain project or budgetary changes as agreed upon with each Agency.

When ARC and an RSBA or BA approve a grant project revision, it will become part of the project record.

An ARC grant project may be closed out when all required project activities have been completed to ARC’s satisfaction; reports have been submitted to ARC or the Basic Agency (for construction projects) and are correct; and any other administrative requirements of the recipient or subrecipient have been concluded. Final payments on any remaining funds due will be provided when the closeout is complete and all award requirements have been satisfactorily met.

Reporting Requirements 

Non-construction grantees must submit all financial and performance reports required by the terms and conditions of the ARC award no later than one month after the end date of the period of performance. Grantees with subrecipients should plan to receive reports from their subrecipients before this one-month deadline. ARC may approve extensions when requested and justified by the grantee.  

Construction grantees will submit final performance and financial reports to their Basic Agency on a schedule provided by the Basic Agency.

ARC Closeout 

Once the recipient and subrecipient have completed all project activities and submitted the necessary performance and financial reports, ARC will make every effort to complete its closeout actions efficiently. Reports are reviewed and approved by: the Basic Agency (for construction projects), the ARC Project Coordinator, the ARC Division Director, the ARC Office of the General Counsel, and the ARC Finance Department for final payment.

At closeout, ARC will make all necessary adjustments to the final federal award and match amount, and promptly pay any remaining funds to the grantee for allowable costs incurred. As part of that closeout process, pass-through entities are also responsible for making payments to their subrecipients promptly.

Closeouts in the Event of Noncompliance

If a grantee does not complete grant requirements in a timely manner in accordance with federal regulations, ARC may pursue enforcement actions outlined in 2 CFR § 200.339. Additionally, if a grantee has not complied with 2 CFR § 200.344 (closeout regulations), 2 CFR § 200.344(i) states that ARC must report a material failure to comply with award terms and conditions in SAM.gov.  

Even after closeout, ARC, the Basic Agency (if applicable), and the grant recipient and/or subrecipient may need to take action to fulfill grant requirements. These include the following:

• ARC or a pass-through entity may need to disallow costs and recover funds on the basis of a later audit or other review. ARC or the pass-through entity must make any cost disallowance determination and notify the recipient or subrecipient within the record retention period. 
• A recipient or subrecipient may need to return funds as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments.  
• ARC may need to make financial adjustments to a previously closed award, such as resolving indirect cost payments and making final payments.  
• The parties may need to take action to comply with and/or fulfill audit requirements in Subpart F of the Uniform Guidance.  
• The parties may need to fulfill property management and disposition requirements in 2 CFR §§ 200.310–316.  

• Records must be retained as required in 2 CFR §§ 200.334-337. 

After closeout of the federal award, a relationship created under the federal award may be modified or ended in whole or in part with the consent of ARC or the pass-through entity and the non-Federal entity, provided the responsibilities of the non-Federal entity referred to above, including those for property management (if applicable), are considered and provisions are made for continuing responsibilities of the non-Federal entity, as appropriate. 

For more information on post-closeout requirements, see 2 CFR § 200.345. 

Generally, grant recipients and subrecipients must retain financial records, supporting documents, statistical records, and all other records pertinent to a federal award for three years from the date of submission of their final financial report. Retention is required for examination and audit purposes. Pass-through entities must require their subrecipients to maintain records that ensure compliance with record retention rules. See 2 CFR § 200.334. 

Exceptions to the Three-Year Retention Period 

The following are exceptions to the standard record retention period described above: 

• If any litigation, claim, or audit is started before the expiration of the three-year period, the records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken. 
• When notified by ARC, the cognizant agency for audit, the oversight agency for audit, the cognizant agency for indirect costs, or the pass-through entity to extend the retention period. 
• Records for real property and equipment acquired with federal funds must be retained for three years after final disposition. See 2 CFR § 200.311 (real property) and 2 CFR § 200.313 (equipment). 
• When records are transferred to or maintained by ARC, the three-year retention period requirement is not applicable to the recipient and/or subrecipient.
• Indirect cost proposals submitted for negotiation must be retained for three years from the date of submission. 
• Indirect cost proposals not required to be submitted for negotiation must be maintained for three years from the end of the fiscal year covered by the proposal. 

See 2 CFR § 200.334. 

Examples of Records 

All records pertinent to the federal award must be retained by the recipient and/or subrecipient. This includes financial records, supporting documents, and statistical records. Some examples of records that must be retained include the following: 

• Financial records, including cost documentation, such as receipts and paid invoices, as well as accounting records; 
• Performance reports and documentation supporting reported performance data; 
• Property records, such as acquisition paperwork, leases, appraisals and other valuation documentation, and property management records; 
• Procurement records, including solicitations, executed contracts, documentation of quotations and competition sought; and 
• Personnel documentation, such as timesheets and time and effort reports. 

The records that need to be retained will vary from project to project, depending on the activities conducted under the award. Any and all records pertinent to each federal award must be retained, so it is important that recipients and subrecipients have adequate policies and procedures in place to ensure all relevant documents are retained. 

ARC, ARC’s Office of the Inspector General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have access to any documents, papers, or other records of recipients or subrecipients which are pertinent to the award, in order to make audits, execute site visits, or for any other official use. The right also includes timely and reasonable access to the recipient’s or subrecipient’s personnel for the purpose of interview and discussion related to such documents. The right of access is not limited to the required retention period, but will last as long as the records are retained. See 2 CFR § 200.337. 

ARC also engages in verification work after a grant is closed out. The verification process may include virtual or in-person interviews or surveys designed to confirm project outcomes up to five years after a project is completed. ARC Code 8.9 requires that recipients and subrecipients cooperate with these evaluations. 

The Appalachian Regional Development Act requires that the ARC keep complete and accurate records of its doings and transactions, and make those records available for public inspection (40 U.S.C. 14308 (a)). As such, the recipient and/or subrecipient’s ARC grant records, to the extent that they are provided to ARC, are subject to ARC’s Open Records Policy. Please see ARC Code Section 4.5 for more information.

ARC will not limit public access to federal award records, when requested, except in the following circumstances: 

• The records contain personally identifiable information (PII) protected by law, or 
• When ARC can demonstrate that such records should be kept confidential and should be exempted from disclosure pursuant to ARC’s Open Records Policy (ARC Code Section 4.5), or  
• Otherwise pursuant to law.  

Unless required by federal, state, local, and tribal statute, award recipients and subrecipients are not required to permit public access to their own records.

When practicable, recipients and subrecipients must collect, transmit, and store federal award-related information in open and machine-readable formats rather than on paper. A machine-readable format is a format in a standard computer language that can be read automatically by a computer system. However, ARC understands that this standard is not achievable in all circumstances, and recipients and subrecipients should instead meet this standard whenever possible.

When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic conversion, provided that the conversion method is subject to periodic quality control reviews, provides reasonable safeguards against alteration, and the records remain readable. When original records are electronic and cannot be altered, there is no need to create and retain paper copies.

See 2 CFR § 200.336. 

Federal award recipients and subrecipients that expend $1 million or more during their fiscal year in federal awards must have a single or program-specific audit conducted for that year, as required by the provisions of 2 CFR Subpart F. See 2 CFR § 200.501(a). (This requirement applies to “non-Federal entities”, defined in 2 CFR § 200.1 “Non-Federal entity (NFE)”. Please consult that section for the definition and applicability of this requirement.)

Independent auditors will follow the requirements prescribed in 2 CFR Subpart F or OMB Circular A-133, as applicable. 

• The ARC Office of Inspector General (OIG) provides independent and objective audits and investigations relating to ARC’s programs and operations, and keeps the Commission and Congress fully informed about any problems or deficiencies at the Commission. 
• In addition, the OIG provides leadership and coordination, recommends policies to prevent and detect fraud and abuse, and promotes economy, efficiency, and effectiveness in ARC’s programs and operations. The OIG has statutory authority to subpoena or otherwise obtain all records, files, reports, documents, or materials needed to conduct audits, inspections, and investigations. 
• The Inspector General has the right of access to any documents, papers, or other records of a recipient or subrecipient which are pertinent to the federal award, in order to make audits. See 2 CFR § 200.337.  

For more information on the OIG and related resources, including how to report fraud, waste, and abuse, visit arc.gov/office-of-inspector-general.

Audit Scope

The objectives of the performance audits conducted by the OIG are to determine whether:

1. grant funds were managed in accordance with the ARC and Federal grant requirements;
2. grant funds were expended, as provided for in the approved grant budget;
3. internal guidelines, including program (internal) controls, were adequate and operating effectively;
4. accounting and reporting requirements were implemented in accordance with accounting principles generally accepted in the United States of America (or other applicable accounting and reporting requirements);
5. matching requirements were met; and
6. the reported performance measures were fair and reasonable.

Audit Process

There are five key audit milestones: 1) notification of audit, 2) entrance conference, 3) fieldwork, 4) exit conference, and 5) reporting.

1. Notification of audit: The grantee will receive a Letter of Intent informing them of an upcoming audit, requesting information and providing a frequently asked questions document. At this juncture, the auditors will schedule an entrance conference and begin to review grant documentation in ARC’s grants management system.
2. Entrance conference: The audit team introduces themselves; seeks to gain and understanding of the grant project; reviews the scope, objective and methodology of the audit; discusses the audit schedule; identifies the appropriate points of contact; discusses next steps, including giving the grantee the Provided by Client List (a detailed list of documents and information the auditors need from the grantee); and answers any questions from the grantee.
3. Fieldwork: The auditors gather information on the grant project, perform testing, analyze results, and engage in a discussion of the draft report.
4. Exit conference: The audit team discusses the results of the audit to the grantee; the grantee is able to provide informal comments on the draft report; there is a discussion of the reporting process; and the grantee provides a Management Representation Letter.
5. Reporting: First, the auditor issues a draft audit report and, if applicable, a draft management letter. The grantee is asked to provide official comments to any recommendations for incorporation into the final report. Then, the auditor issues a final audit report and, if applicable, a final management letter. A final audit report will outline the scope of the audit; provide background on the grant project; describe the results of the audit, including findings (the auditor’s determination regarding the existence of a deficiency) and recommendations (the auditor’s recommendation for curing the deficiency); and the grantee’s response to the recommendations. A final audit report is issued to the ARC Executive Director, with the relevant parties from ARC and the grantee included on the distribution. The final report is posted on the ARC website, on Oversight.gov, and in ARC’s grants management system. The recommendations in the report are reportable (they are included in the OIG’s semi-annual report to Congress), and ARC must issue a management decision and take final action in response to any recommendations.

Any final report recommendations must be resolved in cooperation with ARC.

It is important for grantees to have procedures in place to address any audit findings and recommendations. This should include designating employees responsible for assisting the auditor with any documentation that is required, following up on any audit findings and recommendations, maintaining and ensuring a corrective action plan (as required by 2 CFR § 200.511(c)) is followed, and implementing any corrective action in response to audit findings and recommendations within the organization. 

Pass-through entities are responsible for making sure that their subrecipients comply with the audit requirements set forth in the Uniform Guidance, including verifying that every subrecipient is audited as required by Subpart F of the Uniform Guidance when the subrecipient expends $1 million or more during the subrecipient’s fiscal year. See 2 CFR § 200.332(f)2 CFR § 200.332(g). The pass-through entity should include applicable audit requirements in their subaward agreements, including the requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary to meet federal requirements. See 2 CFR § 200.332(a)(5), 2 CFR § 200.332(b)(5).

Some common audit findings include the following:  

• General financial management. Financial management systems must be sufficient to prepare reports, trace all funds, and ensure control and accountability over all property, funds, and assets. 
• Internal controls. Policies and procedures must provide reasonable assurance that the ARC grant will be managed in compliance with applicable statutes, regulations, and grant terms and conditions. 
• Separate accounts. If your organization manages several grants, each grant must be accounted for separately, including activities, receipts, expenditures, and any matching fund documentation. Records must identify the source and use of funds provided for each grant-funded activity; no commingling of funds. 
• Documenting and identifying match. If your project will be using in-kind or third-party property or services for matching purposes, records should be maintained, including a listing of sources and documentation showing that the contributions were valued according to federal cost principles at Subpart E and 2 CFR § 200.306, e.g., appraisals, evidence of local rates of pay, etc. Documents such as invoices, volunteer time sheets, employee pay records, receipts, etc. should support all services donated. 
• Direct/indirect costs. With a few exceptions, indirect costs charged to an ARC project must be pursuant to (a) a federally negotiated indirect cost rate or (b) the de minimis rate provided in federal regulations, as documented in writing. The rate must be listed in the approved ARC budget. Indirect and direct costs must be treated consistently. 
• Equipment and property. Written equipment management and maintenance procedures must be followed, according to federal regulations and ARC requirements, including inventory requirements, filing of a notice of federal interest, and proper use. 
• Timeframe of eligible expenses. Expenses charged to the ARC project must be incurred during the grant period of performance. As noted previously, any grant period extensions must be approved by ARC before the grant period expires. 
• Support of salaries and wages. All documentation relating to salaries and wages charged to your ARC grant should be maintained. Salaries and wages must reflect the actual activity of each employee, not a budget estimate. 
• Performance measures. Final reports should describe actual achievements rather than estimates, and tie objectives met to the objectives outlined in the grant agreement. 
• Allowable costs. All costs charged to your ARC grant must be allowable under federal cost principles, 2 CFR Part 200 Subpart E. 
• Performance period. All costs charged to your ARC grant must be incurred during the period of performance, not before or after.
• Procurement. Written procurement policies and procedures should reflect requirements in federal regulations at 2 CFR § 200.317-327, including (for grantees that are not state agencies or Indian Tribes) requirements relating to competition, standards of conduct prohibiting conflicts of interest, and cost and price analyses.
• Costs with respect to travel. Travel claims should follow written policies of the grantee when consistent with federal regulations at 2 CFR Part 200, including but not limited to 2 CFR § 200.475. Invoices should support costs and expenditures.