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8. POSTAWARD ADMINISTRATION (PHS GPS 9505)



This section deals with a number of postaward administrative requirements concerning changes from the approved application or budget, the disposition of grant-related income, and the use and disposition of property. Reporting, record retention and access, and financial management requirements are also discussed.

CHANGES IN EXPENDITURES/ACTIVITIES

Recipients are, in general, allowed a certain degree of latitude in making postaward programmatic changes and budget revisions in those PHS nonconstruction discretionary grants awarded on the basis of an approved grant budget broken down by object class (personnel, travel, supplies, etc.) and specifying funds for those classes that are available to carry out the approved activities. Unless otherwise restricted by the terms of the award, documentation of the grant budget on the Notice of Grant Award (NGA) and reference to the approved application constitutes prior approval by the PHS awarding office Grants Management Officer (GMO) for the performance of activities and the expenditure of funds for the specific purposes and items described in the grant application.

Except as provided below, for postaward changes, the grantee institution is permitted to rebudget within and between budget categories in the approved total direct cost budget of the project to meet unanticipated requirements or to accomplish certain programmatic changes. In using this authority, grantees must ensure that they exercise proper stewardship over Federal funds and that all costs charged to the awards are allowable, allocable, and reasonable.

CHANGES IN PROJECT

This section covers policies on changes in approved PHS grant-supported activities initiated by grantees due to changes in personnel, changes in the status or organization of the grantee, or changes in the objectives or timeframe of the approved project. It also includes PHS-initiated changes other than those dealt with in "Suspension, Termination, and Withholding." These changes are permitted when accomplished according to the guidelines below.

Beginning Date

Necessary changes in the beginning date of a grant-supported project should be requested before the issuance of an award document. Any costs incurred or resulting from obligations made before the beginning date of a budget period under a new award or competing continuation award and charged to that award are not allowable unless the costs involved are included in the approved budget and, if incurred more than 90 days prior to the effective date of the award, the costs are approved by the PHS awarding office as preaward costs. (See section 7, "Preaward (Preagreement).")

Protocol or Scope

In general, the principal investigator or project director of an approved PHS project grant may make minor changes in methodology, approach, or other aspects of the project objectives. However, except as provided below, the grantee must obtain prior approval from the PHS awarding office for changes in scope, direction, type of service delivery or training, or other areas that constitute a significant change from the objectives or purposes of the approved project. Principal investigators on research grants may make significant changes in methods or procedures that need only be reported to the awarding office in the progress report for the applicable period.

Examples (or tests) of changes of scope or objectives include but are not limited to the following: transferring the performance of substantive programmatic work by contract or any other means; significant change in the use of human subjects, whether first-time use or substantial change in planned use; change in key personnel whose expertise is critical to the approved project; and a significant rebudgeting action, whether or not it requires approval under rules governing budget changes. This list is not all inclusive.

As a guideline, significant rebudgeting occurs when the cumulative amount of transfers among direct cost categories for the current budget period exceeds 25 percent of the total amount awarded, or $250,000, whichever is less. When this threshold is reached, the grantee shall consult with the GMO for a decision as to whether the rebudgeting constitutes a change of scope. If the GMO determines that the significant rebudgeting constitutes a change of scope, prior approval is required.

Status or Absence of Program Director, Project
Director, or Principal Investigator

Whenever there is to be a significant change in the level of participation in the approved project by the project director, program director, or principal investigator, as named on the NGA--i.e., when the project will continue without any active direction of that individual during any continuous period of more than 3 months or when that individual either withdraws from the project entirely or proposes to devote substantially less effort to the project than was anticipated at the time of award--the grantee should notify the PHS awarding office as soon as such information is known but no later than 30 days before the expected date of departure or change in participation level. Since approval of a project has, to some extent, been based on the participation and/or qualifications of the named program director, project director, or principal investigator, grantee institutions are required to notify the PHS awarding office of the proposed alternative plans for conducting the activity.

In some cases, where required by law or regulation (including 45 CFR Part 92.30 and 45 CFR Part 74, Subpart L) or by a special provision of the award, PHS awarding office approval of these changes is required and must be requested before the actual change in status of the incumbent. Specific cases include the following:

Where prior approval is required, if the arrangements proposed by the grantee, including the qualifications of any proposed replacement, are not acceptable to PHS, the grant may be terminated. If the grantee wishes to terminate the project because it cannot make suitable alternate arrangements, it should notify the PHS awarding office of its intent and PHS will forward closeout instructions.

Change of Grantee Organization

The legal and administrative responsibility for administering a grant-supported project or activity may be transferred from one legal entity to another before the expiration date of the approved project period for the grant being transferred. Such a change of grantee organization may be accomplished under most PHS discretionary grants (including construction grants), but only as indicated below.

When these conditions have been met, funds withdrawn from the original grantee may be reawarded to the replacement grantee, even if the appropriation from which they came has expired.

A change of grantee organization may not take place where it involves an award to an individual. However, a transfer by an individual fellow to a different department or institution or a change in the fellow's sponsor is not considered a change of grantee organization and may be allowable with the prior approval of the PHS awarding office without regard to the conditions above. Administrative approval will not be given for a proposed transfer to a replacement grantee that does not meet PHS programmatic and administrative requirements.

A change of grantee may not take place where it will involve the transfer of a grant to or between foreign institutions or international organizations.

A change of grantee action for a training grant or a resource grant would normally be permitted only when all of the permanent benefits attributable to the original grant can be transferred, including applicable equipment and the curriculum developed under a training grant (see "Property Management and Accountability").

When the principal investigator on a research project transfers from one domestic institution to another domestic institution or from a foreign institution to a domestic institution, the project under the same principal investigator may be supported at the new institution for a period up to the remainder of the previously approved project period in an amount not to exceed that previously recommended for direct costs for the remaining period. The change may be made without competitive review provided that the original grantee institution agrees in writing to relinquish the project, the new institution submits a new application form for support of the project, the investigator plans no significant change in research objectives and level of funding for direct costs from that proposed for the project as originally approved, and the facilities and resources at the new location allow for successful performance of the project. If these conditions or other programmatic or administrative requirements are not met, the PHS awarding office may require a competitive review (see section 4, "Internal Review Process").

A change of grantee organization may also be accomplished noncompetitively in the following situations for nonresearch grants (other than training or resource grants as indicated above):

When a grant is terminated either by mutual consent or unilaterally by the grantee, a written statement from the original grantee relinquishing its interests and rights to the grant must be provided in accordance with instructions from the PHS awarding office. Acceptance of a relinquishment statement by PHS does not guarantee PHS approval of a replacement application for the continued funding of a project.

Where PHS terminates a grant for cause, if the grantee does not provide a relinquishment statement pending the exercise of its appeal rights (see "Grant Appeals Procedures"), a replacement grant may only be awarded under the circumstances described in item 2 above. If this occurs, the NGA for the replacement grant will indicate that if the original grantee is successful in its appeal, the replacement grant may be terminated.

Eligible applicants for replacement grants under service programs will be limited to organizations serving, or proposing to serve, at a minimum, the same group(s) or community population served by the original grantee.

Successor in Interest and Name Changes

As a result of legislative or other action affecting the legal status of a grantee institution, such as a merger, divestiture, or other corporate change, PHS may recognize a new grantee organization as the successor in interest to the assets involved in PHS grant-supported activities. Such interest may be acquired incidentally to the transfer of all the assets of the grantee or all of that part of the assets involved in the performance of the grant-supported activities. The new organization must meet the grant program's eligibility requirements in order to be recognized as the successor in interest. The current recipient of PHS grant support is responsible for promptly notifying the affected PHS awarding office of the impending change. A successor-in-interest agreement must be executed by PHS, the transferor, and the transferee. This may be a single agreement for all affected PHS grants. Before the execution of such an agreement, the grantee must submit the following documents to the PHS awarding office (1) affected, as applicable:

If only the grantee organization's name changes and the rights and obligations of the grantee are not affected, the grantee shall notify the PHS awarding office of the change and provide the following documents:

Neither successor-in-interest nor name change situations will be considered as change of grantee organization situations for purposes of applying the policies and procedures contained in that section.

PRIOR APPROVAL AUTHORITIES

For discretionary grants other than construction grants (2), grantees must obtain written prior approval from the GMO of the PHS awarding office for the following postaward changes. Other prior approvals may be required by the NGA, specific program legislation, or regulations. Therefore, the following list may not be all inclusive. PHS has extended additional authorities for recipients of certain PHS research grants (see "Prior Approval Authorities Retained by PHS for Research Grants"). For State and local governments and federally recognized Indian tribes, PHS has waived the 10-percent cumulative threshold contained in 45 CFR Part 92.30, and only the items listed below must receive PHS prior approval.

For those rebudgeting actions listed below, prior approval is required whether increasing an existing budget category or using funds for categories not in the originally approved budget. Failure to obtain prior approval, when required, from the appropriate PHS awarding office may result in the disallowance of costs.

SPECIAL PROVISIONS FOR
RESEARCH GRANTS

PHS has waived approval of certain actions which had previously required awarding office prior approval. These expanded authorities are applicable to all PHS research grants with the following exceptions: cooperative agreements, certain for-profit organizations (see appendix 6), awards to individuals or foreign institutions, class deviations granted by the Office of the Assistant Secretary for Health (OASH) for a particular program or class of grants, and when circumstances indicate that the expanded authority should not be extended to a specific research grant (for example, the designation of the recipient as "high risk"). Where expanded authorities are applicable, only the prior approvals listed in this section shall apply. Several of the expanded authorities have specific deadlines for submission of reports or for timely notification to the PHS awarding office. Grantees should be aware that any consistent pattern of failure to adhere to those deadlines for reporting or notification in items 1 and 3 shall be grounds for excluding that grantee institution from these special provisions.

NIH has received a class deviation from OASH and is applying the expanded authorities only to the "R" series of research grants with the following exceptions: R10, Cooperative Clinical Research Grants; R18, Research Demonstration and Dissemination Projects; R43, Small Business Innovation Research (SBIR) Grants, Phase I; and R44, SBIR Grants, Phase II.

Authorities Given to Grantees

When the NGA indicates that a research grant is subject to special grants administration provisions (i.e., expanded authorities), the recipient may take the following actions without PHS prior approval.

Prior Approval Authorities Retained by PHS
for Research Grants

REQUESTS FOR APPROVALS

Under discretionary grants, all requests that require PHS awarding office prior approval must be submitted in writing to the GMO designated on the NGA.(3) All requests must bear the signature of an authorized official of the business office of the grantee organization as well as the principal investigator or program or project director. The GMO shall be responsible for reviewing the request with PHS program officials, as necessary, and for informing the grantee in writing of the final disposition of the request.

Only responses signed by the GMO are to be considered valid. Grantees who take action on the basis of letters by unauthorized officials do so at their own risk. Such responses will not be considered binding by or upon the Public Health Service.

Whenever grantees contemplate rebudgeting or other postaward changes and are uncertain about the allowability of types or levels of cost or an activity(ies), particularly when such items are not mentioned in the regulations, cost principles, or other HHS or PHS policy documents, they are strongly encouraged to consult in advance with the designated GMO.

Failure to obtain prior approval when required from the appropriate PHS awarding office may result in the disallowance of costs. Additionally, even where the grantee has responsibility for rebudgeting actions, if it is determined, through audit or otherwise, that the costs do not meet the required tests of allowability, allocability, applicability, reasonableness, etc., the costs may be disallowed.

Construction Grants

Under construction grants, the grantee (owner) must request PHS awarding office prior approval for unsolicited modifications or changes to previously approved construction contracts whenever--

After receipt of written prior approval from the PHS awarding office GMO, the grantee may authorize the approved modification(s) of the construction contract. Other less substantive modifications to construction contracts may be accomplished without PHS awarding office prior approval. However, copies of all change orders to construction contracts must be retained as grant-related records (see "Record Retention and Access").

CITIZENSHIP

PHS will not intercede in behalf of non-U.S. citizens who may be principal investigators or project directors or otherwise participating in a project and whose stay in the United States may be limited by their visa status. For this reason, the grantee institution shall determine and the application shall indicate that the individual's visa will allow the person to remain in the country a sufficient length of time to be productive on the project.

FEDERAL INCOME TAX

All recipients of PHS grant funds, whether such funds are received directly from PHS or indirectly under a subgrant, contract, or other assistance (for example, student assistance under a training grant), are responsible for and must adhere to all applicable Federal income tax regulations. Questions concerning the applicability of such regulations to grant funds should be directed to the Internal Revenue Service (IRS). Additional guidance for fellows and trainees is provided in IRS Publication 520, "Tax Information for American Scholars in the U.S. and Abroad," which may be obtained from IRS.

PROGRAM INCOME

Recipients are accountable to PHS for certain kinds of program income in accordance with 45 CFR Part 74, Subpart F, and 45 CFR Part 92.25. Contracts under a grant are subject to the terms of the contract with regard to the income generated by the activities. Program income includes general program income (see 45 CFR Part 74.42); proceeds from the sale of assets acquired with project funds; royalties from copyrights on publications developed under, or patents and inventions conceived or first actually reduced to practice under, a grant-supported project; and interest and investment income. These requirements are set forth in 45 CFR Part 74, Subpart F, and in 45 CFR Part 92.25 and are summarized below.

Each NGA will provide information as to the treatment of program income for each funded project.

General Program Income

All general program income, as defined in 45 CFR Part 74.42 and program income as defined in 45 CFR Part 92.25, earned during the period of PHS grant support shall be retained by the recipient and shall be treated in accordance with one or a combination of the following options:

Option 1 above may always be selected by recipients and must be used if neither of the other alternatives is specified by the PHS awarding office in regulations or on the NGA. A subgrantee may not be permitted to use an option not permitted by the terms of the award to the grantee.

For information on treatment of program income by--

Interest earned by recipients as a result of a permissible use of general program income, e.g., where a statute or other grant term provides for the use of income to be deferred to a later period, shall be retained by the recipient and treated as general program income.

Treatment of General Program Income
Under Research Grants

Recipients of certain PHS research grants have been extended the authority to use the Additional Costs Alternative (see "Special Provisions for Research Grants"). Each NGA will provide information as to the treatment of program income for each funded project.

For research grants not included in the special grant provisions (expanded authorities), general program income shall be used as follows unless specified otherwise by the awarding office:

Sale of Real Property, Equipment, and Supplies

Sale of Property

45 CFR Part 74.134 states that the disposition instructions of the granting agency shall be followed when real property is no longer to be used by the grantee or transferred to an eligible third party.

Sale of Equipment

Grantees subject to the requirements in 45 CFR Part 74.139, Disposition of Equipment, shall report income earned from the sale of equipment on the FSR if the grantee's project or program for which equipment was acquired is still receiving grant support. If authorized by the awarding unit, grantees may use the income for allowable costs of the project. This income would be reported on lines 10c, 10r, or 10s of the FSR (Long Form) in accordance with the PHS awarding office's authorized disposition. There are no reporting requirements for nonprofit institutions of higher education or nonprofit organizations whose primary purpose is the conduct of scientific research, since they are not subject to the requirements in 45 CFR Part 74.139.

Unused Supplies

Grantees subject to the requirements in 45 CFR Part 74.141, Unused Supplies, shall reflect any credit to the grant on line 10c of the FSR (Long Form). There are no reporting requirements for nonprofit institutions of higher education or nonprofit organizations whose primary purpose is the conduct of scientific research, since they are not subject to the requirements in 45 CFR Part 74.141.

Other Income

Royalties From a Copyrighted Work

Where the terms of the NGA do not specify disposition, no reporting of income is required on the FSR. Where the terms of the NGA govern disposition, this kind of income shall be reported on lines 10c, 10r, or 10s of the FSR (Long Form), in accordance with the PHS awarding office's authorized disposition.

Royalties From Patents or Inventions

Where the terms of the NGA govern disposition, this kind of income would be reported on lines 10c, 10r, or 10s of the FSR in accordance with the PHS awarding office's authorized disposition. Where the terms of the NGA do not specify disposition, PHS awarding office instructions for reporting this kind of income shall be followed.

Interest and Investment Income

Except as provided immediately below, grantees shall remit to the Federal Government any interest or other investment income earned on advances of PHS grant funds. This includes any interest or investment income earned by subgrantees and cost-type contractors on advances to them that are attributable to advances of PHS grant funds to the grantee. However, States shall not be accountable to the Federal Government for interest or investment income earned by the State itself, or by its subgrantees, where this income is attributable to Federal grants.

Income After the Grant or Subgrant Support
Not Otherwise Treated

Unless specified in the terms of the NGA, there are no reporting requirements for income accrued after the period of grant support ends.

INTEREST EARNED ON ADVANCES OF
GRANT FUNDS

Except as provided in 45 CFR Part 74.47(b), public and private nonprofit institutions of higher education, public and private nonprofit hospitals, and other private nonprofit grantees shall maintain advances of Federal funds in interest-bearing accounts. Except as provided in 45 CFR Part 92.21(i), interest earned on Federal advances deposited in such accounts shall be remitted promptly, but at least quarterly, to the Federal agencies that provided the funds.

Interest amounts up to $100 per recipient fiscal year may be retained by the recipient for administrative expenses. The $100 pertains to the total interest earned on all Federal advances from all Federal agencies. Where a grantee institution earns interest on advances from two or more Federal sources, the grantee is not required to prorate the $100 retainer among its various Federal funding source but may elect to deduct it from whichever Federal funding source it chooses.

PROPERTY MANAGEMENT AND
ACCOUNTABILITY

Unless otherwise restricted by the terms of an award, the costs of equipment and supplies are allowable under PHS grant-supported projects and activities under the conditions set forth in the applicable cost principles and the policies in this document. Property purchased, constructed, or fabricated with either PHS grant funds or any required grantee matching is considered to be property acquired under a PHS grant-supported project if some or all of the property's acquisition cost is a direct charge to project funds, i.e., a cost incurred under the total approved direct cost budget. Most property acquired under a PHS grant-supported project is subject to 45 CFR Part 74, Subpart O (see 45 CFR Part 74.130 for exceptions), and 45 CFR Part 92.32.

Generally, recipients may use their own property management policies and procedures provided they observe the requirements in 45 CFR Part 74, Subpart O, or 45 CFR Part 92.32, as applicable, and the following PHS policies.

The dollar threshold for determining the applicability of several of the requirements in Subpart O and 45 CFR Part 92 is based on the unit acquisition cost of an item of equipment. As defined in 45 CFR Part 74, the cost of an item of equipment to the recipient includes necessary modifications, attachments, etc., that make it usable for the purpose for which it was acquired or fabricated. When such accessories or attachments are acquired separately and serve to replace, enhance, supplement, or otherwise modify the equipment's capacity, and they individually meet the definition of equipment (see "Glossary"), the applicable PHS prior approval requirements must be observed for each item. The aggregate acquisition cost of an operating piece of equipment, however, will be used to determine the applicable provisions of 45 CFR Part 74, Subpart O, and 45 CFR Part 92.32.

If property is fabricated from individual component parts, each component must itself be classified as equipment if it meets the definition of equipment (see "Glossary"). In such cases, the aggregate acquisition cost of the resulting piece of equipment will determine the appropriate requirements for accountability in 45 CFR Part 74, Subpart O, and 45 CFR Part 92. For the purposes of Subpart O and 45 CFR Part 92, the aggregate cost of the fabricated equipment will be used to determine whether the PHS awarding office will have the right to require transfer of title to a piece of fabricated equipment.

Recipients are required to be prudent in the acquisition of property under a grant-supported project. It is the recipient's responsibility to conduct a prior review of each proposed property acquisition to ensure that the property is needed and that the need cannot be met with property already in the possession of the organization. If prior approval is required for the acquisition, the recipient must ensure that appropriate approval is obtained in advance of the acquisition. The recipient's procurement practices must be in compliance with 45 CFR Part 74, Subpart P; 45 CFR Part 92.36; and "Management Systems and Procedures" herein.

Recipients of PHS grant funds other than Federal institutions cannot be authorized to use Federal supply sources (see Federal Property Management Regulations, Amendment E-125, dated November 10, 1972).

Surplus and Excess Property

Surplus property (real property, equipment, or materials that the General Services Administration (GSA) has determined are no longer required by any agency of the Federal Government) is available to eligible parties, as specified in the implementing regulations cited below, through sale (real property) or donation (personal property). The Federal property assistance program for real property is administered by the Division of Health Facilities Planning, ORM/OM/ PHS pursuant to 45 CFR Part 12. The program for donation of surplus personal property is administered by GSA (see 41 CFR Part 101-144) through designated State agencies. Although project funds may be used for the shipping and handling of donated surplus property, surplus personal property once under the control of a recipient organization is subject to the requirements of the governing GSA regulations rather than the requirements of 45 CFR Parts 74 and 92, since such property is not considered to have been acquired with project funds.

Excess Federal property is equipment and materials with a useful life that is no longer required by the Federal holding agency and that has been reported to GSA for disposal. PHS does not provide excess Federal property to recipients.

Real Property

Real property may be acquired only when authorized by program legislation and when specifically provided for in the grant award.

Real property acquired or constructed under a PHS grant-supported project will be subject to the requirements of 45 CFR Parts 74.134, 74.710, or 92.31, as applicable, regarding acquisition, use, transfer of title, and disposition in addition to any program-specific or project-specific requirements imposed by the terms of the award. However, equipment that is part of a real property acquisition or construction grant is subject to the equipment management and disposition rules, rather than the real property rules.

For disposition of property acquired on an amortized acquisition basis, the formula in 45 CFR Parts 74.142 and 92.31 does not apply in determining the Federal share. In cases of amortized acquisition, the Federal share will be determined by multiplying the amount of mortgage principal already repaid at time of disposition by the average Federal participation (taken from the FSR) plus the increase in value over the purchase price multiplied by the average Federal participation plus the Federal participation in the down payment. The computation of the Federal share of the real property acquired with long-term debt financing must be computed for each year of grant support in which Federal funds are used to meet all or a portion of the down payment and/or principal on the mortgage.

In some cases, the governing statute for a PHS grant program will contain specific requirements regarding the length of the grantee's accountability obligations for real property, the Federal right of recovery, and waiver provision. In such cases, those provisions of 45 CFR Parts 74 and 92 that are consistent with the statute will still apply unless other terms of the award specify otherwise.

In order to protect the Federal interest in real property when all or a part of the acquisition cost is borne as a direct charge to a PHS grant, grantees shall record a Notice of Federal Interest in the appropriate official records of the jurisdiction in which the property is located either immediately upon purchasing the real property, or in the case of constructed real property, at the time construction begins. Fees charged for such an action may be charged to the grant.

Immediately upon acquiring real property, nongovernmental grantees shall, at a minimum, provide the same insurance coverage as provided to other property owned by the recipient. The term "immediately upon acquiring real property" means either when the builder turns the facility over to the grantee institution (e.g., the date of the final acceptance of the building) or the point of beneficial occupancy, whichever comes first. Federally owned property need not be insured. PHS considers that the coverage described below constitutes minimum prudent insurance coverage of real property acquired with PHS grant support.

Real property acquired with PHS grant support may not be conveyed, transferred, assigned, mortgaged, leased, or in any other manner encumbered by the grantee, except as expressly authorized in writing by the PHS awarding office or its successor organization.

In the event of any default of any description under a mortgage on the part of a grantee, the grantee shall immediately provide the awarding office GMO with both telephone and written notification of the default.

Alteration and renovation of real property undertaken under grant programs that have no specific statutory alteration and renovation or modernization authority are allowable. See "Alteration and Renovation" in section 7.

All real estate transactions funded in whole or in part with PHS financial assistance that require the use of real estate appraisals, including but not limited to appraisals to determine the Federal share of real property and appraisals to determine required insurance levels, must be performed by appraisers certified or licensed by the applicable State in accordance with the requirements established by Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (Public Law 101-73).

Equipment and Supplies

Under authority of Public Law 95-224, nonprofit institutions of higher education and nonprofit organizations whose primary purpose is the conduct of scientific research are exempted from further obligation to the Federal Government for equipment and supplies acquired under a grant for support of basic or applied scientific research, although PHS has the right to require transfer of title to certain equipment as provided in 45 CFR Part 74.136. The exemption does not apply to other types of institutions nor to other types of grants, e.g., training grants, regardless of the type of institution. All other equipment and supplies acquired under PHS grant-supported projects and activities are considered nonexempt.

For items of equipment having a unit acquisition cost of $1,000 or more (for grants subject to 45 CFR Part 74) or $5,000 or more (for grants subject to 45 CFR Part 92), PHS has the right to require transfer of the equipment, including title, to the Federal Government or to an eligible third party named by the PHS awarding office under the conditions specified in 45 CFR Parts 74.136 and 92.32, respectively. This right applies to all types of grantees, including Federal institutions, under all types of grants under the stipulated conditions.

Except in instances where PHS has exercised the right of transfer of equipment, nonexempt equipment shall be used as indicated in 45 CFR Parts 74.137 and 92.32 or disposed of in accordance with 45 CFR Parts 74.139 or 92.32, as applicable. For "other uses" as specified in 45 CFR Part 74.137(d), PHS awarding office prior approval must be obtained before a recipient may make equipment available for use part time for other purposes while it is being used in accordance with 45 CFR Part 74.137(a), (b), or (c). Income generated by such alternate uses is program income and is subject to 45 CFR Part 74.46 if it accrues afterward (see "Program Income").

Exempt property still subject to the right of transfer and nonexempt property before disposition may, if necessary, be exchanged for replacement equipment subject to the rules in 45 CFR Part 74.138.

Policies governing acquisition of equipment by for-profit grantees are contained in appendix 6.

Title to supplies acquired under a grant or subgrant will vest, upon acquisition, in the grantee or subgrantee, respectively.

For governmental grantees subject to 45 CFR Part 92, if there is a residual inventory of unused supplies exceeding $5,000 in total aggregate fair market value upon termination or completion of the award and if the supplies are not needed for any other federally sponsored programs or projects, the grantee or subgrantee shall compensate the PHS awarding office for its share.

For nongovernmental grantees subject to 45 CFR Part 74, if the unused supplies exceed $1,000 in total aggregate fair market value and are not needed for any project or program currently or previously funded by the Federal Government, the recipient may either retain or sell the supplies and must compensate the PHS awarding office for its share. See 45 CFR Part 74.141(b) for details on computing the applicable credit.

Property acquired under a PHS grant-supported project is subject to the requirements for internal control specified in 45 CFR Part 74, Subpart H, and 45 CFR Part 92.32. States shall use, manage, and dispose of equipment acquired under a grant in accordance with State laws and procedures. All other grantees must maintain an adequate equipment management system that meets the following requirements:

A recipient's failure to establish a control system as required by 45 CFR Part 74.140(c) constitutes a material violation of the terms of the award. Therefore, the rights mentioned below are in addition to any other rights that PHS has in the event of a violation of grant terms (see particularly 45 CFR Parts 74.7 and 74.113 and "Financial Management and Non-Federal Audits" and "Suspension, Termination, and Withholding").

If nonexempt equipment with a unit acquisition cost of $1,000 or more is damaged beyond repair, lost, or stolen before disposition under 45 CFR Part 74.139, the recipient may be accountable to PHS as described below.

If, at the time of the loss, theft, or damage, the recipient does not have a control system in effect as required by 45 CFR Part 74.140(c) and the damage, loss, or theft was not due to an act of God (unless PHS waives this position), the following applies:

If the damage, loss, or theft occurs despite the fact that the recipient has the required control system in effect, or the damage, loss, or theft is due to an act of God, there will be no obligation to PHS for the equipment unless the recipient received compensation for the damage, loss, or theft from insurance, a reserve under a self-insurance program, or some other source. If the recipient is compensated and replaces the equipment, 45 CFR Part 74.138 applies to the replacement equipment. If the recipient is compensated but does not replace the equipment, 45 CFR Part 74.139(b) applies as though the recipient had sold the equipment. The amount received for trade-in or sale is considered the lesser value of the amount of compensation or the market value of the equipment at the time it was damaged, lost, or stolen.

Any amount due PHS upon the disposition of real property or equipment may either be in the form of a check made payable to PHS or, at the option of the PHS awarding office, may be applied to allowable costs of the project. This option may only be exercised where the original project for which the property was acquired is still receiving grant support from the same PHS program.

Governmental grantees must not use equipment acquired with grant funds to provide services for a fee to compete unfairly with private companies that provide equivalent services unless specifically permitted or contemplated by Federal statute.

Revocable License

Under certain circumstances, federally owned tangible personal property used under PHS contracts may be made available to grantees under a revocable license agreement. This allows for the transfer of such property to the grantee when it is no longer needed under the contract.

The revocable license agreement between PHS and the grantee would provide for the transfer of the equipment for the period of the grant support under the following conditions:

Since the revocable license provides for the transfer of federally owned property, it may also be used to transfer property from a for-profit grantee (where title to property vests with the Federal Government) to a nonprofit grantee.

PATENTS AND INVENTIONS

PHS awarding offices and recipients of PHS grants shall be governed by governmentwide regulations issued by the Department of Commerce at 37 CFR Part 401 for patents and inventions arising out of activities assisted by a PHS grant. In accordance with 37 CFR 401.1(b), no scholarship, fellowship, training grant, or other funding agreement made by PHS primarily to an awardee for educational purposes will contain any provision giving PHS any rights to inventions made by the awardee. The full text of the standard patents rights clause contained in 37 CFR 401.14 is contained in Appendix 9.

PUBLICATIONS

It is the policy of PHS to make available to the public the results and accomplishments of the activities that it funds. Therefore, it is incumbent upon project directors, program directors, and principal investigators to make results and accomplishments of their activities available to the public. PHS prior approval is not required for publishing the results of an activity under a grant. Recipients shall place an acknowledgment of PHS grant support and a disclaimer, as appropriate, on any publication written or published with such support and, if feasible, on any publication reporting the results of or describing a grant-supported activity. An acknowledgment shall be to the effect that "This publication was made possible by grant number ___________ from . . ." or "The project described was supported by grant number _______ from. . ." and "Its contents are solely the responsibility of the authors and do not necessarily represent the official views of the (name of awarding agency)."

In the event that the recipient wishes to join with PHS in a simultaneous news release announcing the results of a project, the action should be coordinated with the PHS awarding office.

Three reprints of publications resulting from work performed under a PHS grant-supported project or activity must be submitted to the PHS awarding office.

Except as otherwise provided in the terms and conditions of the award, the recipient is free to arrange for copyright without approval when publications, data, (4) or other copyrightable works are developed under or in the course of work under a PHS grant-supported project or activity.

Any such copyrighted or copyrightable works, including materials developed by fellows or trainees under awards whose primary purpose is to further the education or training of such individuals, shall be subject to a royalty-free, nonexclusive, and irrevocable license to the Government to reproduce, publish, or otherwise use them and to authorize others to do so for Federal Government purposes. Whenever any work subject to this copyright policy may be developed in the course of a grant (or with grant support) by a contractor or subcontractor under a grant, the written agreement (contract) must require the contractor to comply with these requirements and can in no way diminish the Government's right in that work. Recipients may arrange for publication of initial reports of original research, supported in whole or in part by PHS grant funds, in primary scientific journals and copyright by the journal unless the journal's copyright policy would preclude individuals from making or having made by any means available to them without regard to the copyright of the journal and without royalty, a single copy of any such article for their own use. (See 45 CFR Part 74, Subparts F and O, 45 CFR Part 92.25, and the terms of the award regarding the PHS rights in copyrightable material and the disposition of royalties and other income earned from a copyrighted work.)

MANAGEMENT SYSTEMS AND
PROCEDURES

Applicant organizations are expected to have certain systems, policies, and procedures in place for managing their own funds, equipment, and personnel before receiving PHS grant support. Demonstration of the applicant's management capabilities may be one of the evaluative criteria used in the review process (see section 4, "Internal Review Process"). PHS will allow recipients to use their established organizational policies, consistently applied regardless of the source of funds, provided that, at a minimum, they meet the standards and requirements set forth in 45 CFR Part 74; 45 CFR Part 92, Subpart C; and those below.

FINANCIAL MANAGEMENT AND
NON-FEDERAL AUDITS

Recipients are required to meet the standards and requirements for financial management systems and non-Federal audits set forth or referenced in 45 CFR Part 74, Subpart H, and in 45 CFR Part 92.20, as applicable.

If the PHS awarding office determines either by means of a preaward financial evaluation or through postaward monitoring that a grantee's financial management systems do not meet these standards, award terms more restrictive than those prescribed in 45 CFR Parts 74 and 92 may be imposed (see 45 CFR Parts 74.7 and 92.12). In these cases, the grantee will be notified in writing by the PHS awarding office as to why the special terms were imposed and what corrective action is needed. These requirements pertain to both PHS grant funds and funds representing non-Federal matching or cost participation required as a term of the award.

FRAUD, ABUSE, AND WASTE

Anyone who becomes aware of the existence or apparent existence of fraud, abuse, and waste of PHS financial assistance funds is encouraged to report this to the HHS Inspector General's Office in writing or on the Inspector General's Hotline. The toll free number is 1-800-368-5779. All telephone calls will be handled confidentially. Written complaints should be addressed to Inspector General, HHS, Room 5250, 200 Independence Avenue SW, Washington, DC 20201.

PROCUREMENT

A State shall follow the same policies and procedures it uses for procurements from its non-Federal funds. All other grantees must follow the requirements in 45 CFR Part 74, Subpart P, or 45 CFR Part 92, sections 41 through 48, as applicable. Consortium arrangements are not procurements and are not subject to these standards. However, they are subject to the rules below on contracting for substantive programmatic work and on written agreements.

Charges for equipment purchased must be made against the grant budget period active on the date of order even though the equipment is not actually received until a succeeding grant budget period. If for any reason equipment that has been ordered in good faith will not be received until after a project has terminated, or will be received too late in the project for effective use, all reasonable effort must be made to cancel the order or to charge the equipment to other funds.

Grant recipients must assure that their procurement procedures include a property management/identification capability to avoid the purchase of unnecessary or duplicative items (see 45 CFR Parts 74.161 and 92.36).

Contracts for Substantive Programmatic Work

Grantees may contract for the performance of substantive programmatic work (see "Glossary") under discretionary grants only with PHS prior approval. Contracting for substantive programmatic work includes the establishment of consortium agreements whereby a research project is carried out by the grantee and one or more cooperating institutions that are separate legal entities independent of the grantee.

The grantee, as the direct and primary recipient of PHS grant funds, must perform a substantive role in carrying out project activities and not merely serve as a conduit for an award to another party or to provide funds to an ineligible party. Although grantees must always maintain a substantive role in a project, there may be instances when it is beneficial to have certain substantive activities performed by others. In these instances, the grantee must document the reasons why it, rather than the ultimate performer of the activity(ies), should be the direct recipient of the PHS funds; that all costs, including indirect costs, proposed are reasonable and commensurate with the work to be performed; and that a formal agreement between the parties has been entered into. Written approval from the PHS awarding office must be obtained prior to the transfer of the conduct of substantive programmatic activities to a third party.

All Contracts

In situations where a grant recipient enters into a service-type contract the term of which is not concurrent with the budget period of the award, the costs of the contract may be charged to the budget period in which the contract is executed even though some of the services will be performed in a succeeding period, provided the PHS awarding office has been made aware of this situation either at the time of application or through postaward notification, the project has been recommended for a project period extending beyond the current year of support, and there is a legal commitment on the part of the recipient to carry out the terms of the contract. Costs will be allowable only to the extent that they are for services that are provided during the period of PHS support. In order to limit liability in the event that continued Federal funding is not forthcoming, it is recommended that recipients insert a clause in such contracts of $10,000 or less stipulating that payment beyond the expiration of the current budget period is contingent on continued Federal funding. The procurement standards prescribed by 45 CFR Part 74, Subpart P, and 45 CFR Part 92.36(i)(2) specify termination provisions for contracts in excess of $10,000.

The arrangements for the conduct of activities that are contracted out shall be formalized in a contract (written agreement) between the recipient and the third party. The contract must, as applicable, state the activities to be performed, the time schedule, the grant policies and requirements that are applicable to the contractor (these may be incorporated by reference where feasible), other policies and procedures to be followed, the maximum amount of money for which the grantee (or subgrantee) may become liable to the third party under the agreement, and the cost principles to be used in determining allowable costs in the case of cost-type contracts. The contract must not affect the grantee's overall responsibility for the direction of the project and accountability to the Government. The agreement shall, therefore, reserve sufficient rights and control to the grantee to enable it to fulfill its role.

Consortium arrangements must also be formalized in a written agreement. A consortium arrangement establishes a collaborative arrangement, not an assistance relationship, between a nongovernmental grantee and the other consortium participants. However, the other participants and the grantee's arrangements with them are subject to the rules and policies in 45 CFR Part 74 and this document that apply to subgrantees and subgrants. A statement to this effect should be contained in the written agreement.

The following requirements are applicable to contracting situations where PHS prior approval is required.

The information provided by the applicant or recipient in its application or postaward request to contract will form the basis for the awarding office decision to approve or disapprove the contracting. Even if the grant application referred to a contracting activity but did not explicitly and clearly state a firm intention on the part of the recipient to contract, a postaward prior approval request must be initiated. This information must include--

Contracting of activities, where prescribed in a grant application or in a postaward request for approval (where required) of such contracting, shall not be approved by PHS unless the following criteria are met:

If a selection has already been made, the selected party must be identified, the reasons for selection must be explained, and all relevant relationships known to exist or planned between the third party and the grantee must be fully described. Failure to disclose all relevant information may result in the disallowance of payments to the third party.

Where approval to contract was previously provided and the activities are expected to continue without significant change during a subsequent budget period, the noncompeting continuation application need not repeat this detailed information but should indicate that the arrangements are expected to continue as previously approved and should reflect the related budgetary needs. Where previously approved contracted activities are expected to change significantly, complete information concerning the proposed changes must be provided.

Approval of contracting may be deferred pending submission of additional information by the applicant or grantee or may be conditioned on the receipt of additional information. The applicant or recipient may, at its option, submit the contract document as a means of providing this information. If that option is elected, any resulting PHS approval does not constitute a legal endorsement of the contract document by the Federal Government nor does such approval establish PHS as a party to any of the contract provisions.

Contracting With Small and Minority Firms,
Women's Business Enterprises, and
Labor Surplus Firms

Nongovernmental grantees must take all necessary affirmative steps to assure that minority firms, women-owned firms, and labor surplus area firms are used whenever possible. These affirmative steps include--

HEALTH AND SAFETY GUIDELINES

The Federal Government is not legally responsible for accidents, illnesses, or claims arising out of any work undertaken with the assistance of a PHS grant. The grantee institution is expected to take necessary steps to protect its personnel from hazardous conditions. Depending upon the particular safety hazard at issue, grantees are expected to consult the following standards:

Items 1 through 6 may be obtained from the Division of Safety, National Institutes of Health, Building 31, Room 1C02, Bethesda, MD 20892. Item 8 may be obtained from the National Committee for Clinical Laboratory Standards, 771 East Lancaster Avenue, Villanova, PA 19085.

Grantee organizations are not required to submit documented assurance of their specific attention to the above standards. However, where dictated by the circumstances, grantees should be able to provide evidence that similar health and safety standards have been considered and, where necessary, have been put in practice.

STANDARDS OF CONDUCT FOR EMPLOYEES

Recipient organizations must establish safeguards to prevent employees, consultants, or members of governing bodies from using their positions for purposes that are, or give the appearance of being, motivated by a desire for private financial gain for themselves or others such as those with whom they have family, business, or other ties. Therefore, each institution receiving financial support must have written policy guidelines on conflict of interest and the avoidance thereof. These guidelines should reflect State and local laws and must cover financial interests, gifts, gratuities and favors, nepotism, and other areas such as political participation and bribery. These rules must also indicate the conditions under which outside activities, relationships, or financial interests are proper or improper and provide for notification of these kinds of activities, relationships, or financial interests to a responsible and objective institution official. For the requirements of a code of conduct applicable to procurements under grants, see the procurement standards prescribed by 45 CFR Part 74, Subpart P, and 45 CFR Part 92.36.

The rules of conduct must contain a provision for prompt notification of violations to a responsible and objective grantee official and must specify the type of administrative action that may be taken against an individual for violations. Administrative actions, which would be in addition to any legal penalties, may include oral admonishment, written reprimand, reassignment, demotion, suspension, or separation. Suspension or separation of a project director or program director or other key official must be reported promptly to the appropriate PHS awarding office (see "Changes in Project").

A copy of the rules of conduct must be given to each officer, employee, board member, and consultant of the recipient organization who is working on the grant-supported project or activity, and the rules must be enforced to the extent permissible under State and local law or to the extent to which the grantee determines it has legal and practical enforcement capacity.

The rules need not be formally submitted to and approved by the PHS awarding office; however, they must be made available for a review upon request, for example, during a site visit.

MONITORING

PHS requires that grantees employ sound management practices to ensure that program objectives are met and that project funds are properly spent. To the extent possible, PHS places reliance on the controls and policies established by grantees. However, in order to fulfill their role in regard to the stewardship of Federal funds, PHS awarding offices monitor their grants to identify potential problems and areas where technical assistance might be necessary. The names and telephone numbers of the individuals responsible for monitoring the programmatic and business management aspects of a project or activity will be provided to the grantee at the time of award.

Monitoring of a project or activity shall continue for as long as PHS retains a residual financial interest in the project or activity, whether or not PHS is providing active grant support. This may include grantees that continue to have an obligation for property acquired under a PHS grant-supported project or activity and owners of facilities constructed under a grant with a statutory or regulatory requirement that the facility be used for a specific purpose for a specified period of time. See also 45 CFR Part 74, Subparts I and J, 45 CFR Part 92.40, and "Reporting."

REPORTING

PHS grant programs in general have requirements for both financial and programmatic performance reporting. The GMO shall serve as the receipt point or obtain assurances of receipt for performance reports, financial status reports, and most other reports required by the terms and conditions of the grant. However, reports required only by payment offices and other reports intended primarily for use by persons outside the cognizant program and grants office need not be sent to the GMO.

Both expenditure and progress reports are generally submitted on an annual basis. At the discretion of the PHS awarding office, such reports may be required at more frequent intervals, but no more often than quarterly, unless indicated by a special provision on the NGA according to 45 CFR Parts 74.7, 74.72(e), 92.12, 92.40, and 92.41. The form or format of required progress reports may vary depending on the type of grant program.

Other reporting requirements may include invention reporting, reporting to the appropriate payment points (in accordance with instructions received from the payment office), and specialized programmatic reports. Information on performance, expenditure, and invention reporting is provided below.

Grantees are expected to publish and provide information to the public on the objectives, methodology, and findings of their PHS-supported research activities.

Programmatic Performance (Progress) Reports

45 CFR Part 74, Subpart J, and 45 CFR Part 92.40 set forth principles and procedures for reporting program performance and allow PHS programs to determine the frequency of such reports, within limits, and to issue instructions for the content of such reports.

Annual progress reports must be submitted with all applications for competing or noncompeting continuation support in accordance with the instructions accompanying the application forms, unless a different date for submission of the annual performance report is specified by the PHS awarding office. Some PHS programs may require narrative and/or quantitative performance data at more frequent intervals. Where quarterly or semi-annual reports are required, they are due 30 days after the close of the period for which the report is being submitted.

The requirements for performance reporting under construction grants or grants supporting both construction activities, including acquisition or modernization, and nonconstruction activities will be specified by the PHS awarding office.

The original and two copies of a final progress report must be submitted to the PHS awarding office within 90 days after the expiration or termination of a nonconstruction project or a project supporting both construction and nonconstruction activities. The report should be prepared according to instructions provided by the PHS awarding office and should include, at a minimum, a summary statement of progress toward the achievement of the originally stated aims, a list of the results (positive or negative) considered significant, and a list of publications resulting from the project, with plans, if any, for further publication. Three copies of reprints of publications not previously submitted should accompany the progress report.

Financial Status (Expenditure) Reports

A report of expenditures is required as documentation of the financial status of grants according to the official accounting records of the grantee organization. For all PHS nonconstruction grants, the FSR is used for this purpose. The report, when required on an annual basis, must be submitted for each budget period no later than 90 days after the close of the budget period. The PHS awarding office may require this report no more frequently than quarterly, except as provided in 45 CFR Parts 74.7, 74.72(e), and 92.12. Where quarterly or semiannual reports are required, they are due 30 days after the close of the period for which the report is being submitted. The report must cover any extension in time of the budget period authorized by the PHS awarding office. The final FSR, which must be submitted within 90 days of the expiration or termination of a grant unless an extension of time for submission is allowed by the PHS awarding office, must have no unliquidated obligations and must indicate the exact balance of unobligated funds. Reports should be submitted to the GMO of the PHS awarding office. No more than an original plus two copies shall be submitted.

Estimated Expenditures

Where an unobligated balance of Federal funds is estimated to remain under a nonconstruction discretionary grant at the end of a budget period (as reported in the grantee's continuation application), the GMO of the PHS awarding office may select one of the following options:

If the grantee estimates a deficit, the GMO and the grantee should discuss administrative measures the recipient should institute to ensure that the project does not incur a deficit and the possibility of submission of a request for supplemental funds.

Actual Expenditures

Upon receipt of an FSR showing actual outlays and obligations of funds, the GMO, for ongoing projects, will compare the total of any unobligated balance shown and the funds awarded for the current budget with the PHS share of the approved budget for the current budget period.

If the funds available exceed the PHS share of the approved budget for the current budget period, the GMO may select one of the following options:

If the funds available are more than $250 short of the PHS share of the approved budget for the current budget period, the GMO will either--

If funds are available for obligation, the awarding office should make a supplemental award to provide additional funds to the grantee in accordance with item 1 immediately above. If funds are not available for obligation or if the additional funds are not needed by the grantee, a revised budget must be negotiated and documented in accordance with item 2.

If the funds available are less than $250 short of the PHS share of the approved budget, the awarding office will normally not make any adjustment unless specifically requested by the grantee.

For both estimated and actual expenditure situations, the GMO is to select the options that will utilize the unobligated balance in the most responsible and expeditious manner available to promote program objectives without creating an unjustifiably high level of continuation costs for succeeding appropriations.

Unobligated funds remaining at the end of a project period that will not be expended revert to the Federal Government. If paid to the grantee, such amounts must be returned to the Federal Government or must be reflected by an appropriate accounting adjustment in accordance with instructions from the GMO of the PHS awarding office or from the payment office. Neither withdrawal of funds awarded on the basis of the grantee's underestimate of the unobligated balance in a prior period nor withdrawal of the unobligated balance as of the expiration of a grant constitutes termination (see "Suspension, Termination, and Withholding").

PHS expects recipients to maintain accurate and timely accounting records with the proper classification of expenditures. Through full utilization of the 90 days available for submission of annual and final FSRs, the grantee should be able to file accurate reports and reduce later amendments and revisions to a minimum.

When a revised report is necessary, the following will apply. Revised expenditure reports representing additional claims by the grantee that were not reported to PHS within the 90 days provided may be submitted to the GMO of the PHS awarding office with an explanation. This should be done as promptly as possible but no later than 1 year from the due date of the original report, i.e., 15 months following the end of the budget period. Any such revised report received after that date will not be accepted and will be returned to the grantee. Where the submission of a revised final FSR results in additional claims by the grantee, PHS will consider the approval of such claims subject to the following minimum criteria:

In the case of the submission of a revised annual FSR, the policy stated above governs if, as a result of less carryover funds than anticipated, a continuation budget period has been underfunded. When the revision results in a balance due to PHS, the revision must be submitted to the GMO of the PHS awarding office whenever the overcharge is discovered, no matter how long the lapse of time since the original due date of the report. Whenever an adjustment is to be made, the PHS awarding office will advise the grantee of actions to be taken to reflect the adjustment.

Invention Reports

All inventions made in the course of or under any PHS research grant shall be promptly and fully reported to the Assistant Secretary for Health, HHS, and in any event shall be reported prior to the publication of any description of the invention. The report must be completed in accordance with instructions provided by the PHS awarding office. See appendix 6 for invention reporting requirements applicable to SBIR awards.

In addition to immediate invention reporting, each application for competing or noncompeting continuation support of a PHS grant-supported research project must include either a listing of all inventions made during the preceding budget period or a certification that no inventions were made during the applicable period.

A Final Invention Statement and Certification is required within 90 days following the expiration or termination of support on an applicable project. All inventions that were conceived or first actually reduced to practice during the course of work under the project from the original effective date of support through the date of expiration or termination, whether or not previously reported, shall be listed on the statement. Each statement will require the signature of the project director or principal investigator and an official authorized to sign on behalf of the grantee organization.

Overdue Reports

Grantees are allowed a reasonable period of time in which to submit required financial and performance reports (see 45 CFR Part 74, Subparts I and J, and 45 CFR Part 92.40 and 92.41). Failure to submit required reports within the time allowed may result in suspension or termination of an active grant, withholding of additional awards for the project, or other enforcement actions, including withholding of payments or converting to the reimbursement method of payment (see section 5, "Payment"). Continued failure to submit required reports may result in the imposition of special award provisions or cause other eligible projects or activities involving that grantee organization or the individual responsible for the delinquency to not be funded.

If at any time the grantee provides an acceptable explanation regarding the late submission of a report, the PHS awarding office may waive the reporting requirement or set a new due date. However, once a report becomes overdue, such action will be taken by the PHS awarding office only if the reasons for the grantee's inability to submit the report in a timely manner are legitimately beyond its control or if the purposes for which the report is to be used can be accomplished through other means. Failure to meet a new date may result in the awarding office taking action as described in the paragraph above.

Submission of a required report does not necessarily fulfill the grantee's responsibility. Such reports must also meet the content requirements in regulations or other grant terms. Where reports need to be revised in order to be accepted, the grantee must provide a revised report by the due date indicated by the PHS awarding office or immediate fund cutoff or other enforcement actions may be taken with regard to the delinquency.

If a report required to be submitted to a payment office becomes overdue, the payment office, following reasonable notice to the grantee, will make no further payments to the grantee until the overdue report is received or the delinquency is corrected by waiving the reporting requirements or setting a new due date. Cash withheld during the period of delinquency, if otherwise payable, will be released when payments are resumed.

RECORD RETENTION AND ACCESS

Financial and programmatic records, supporting documents, statistical records, and all other records of a grantee or subgrantee that are required by the terms of a grant or subgrant or may reasonably be considered pertinent to a grant or subgrant, must be retained for the time period specified in 45 CFR Part 74, Subpart D, or 45 CFR Part 92.42, as applicable. The determination as to when the retention period begins and ends differs for some types of grant-related records, e.g., property records. Access to such records is also governed by the provisions of 45 CFR Part 74, Subpart D, and 45 CFR Part 92.42. See 45 CFR Part 74, Subpart P, and 45 CFR Part 92.36 in regard to record retention and access requirements for contracts under grants.

SUSPENSION, TERMINATION,
AND WITHHOLDING

When a grantee has materially failed to comply with the terms and conditions of a grant, PHS may suspend the grant, terminate the grant for cause, or take such other remedies as may be legally available and appropriate in the circumstances. PHS prefers that deficiencies be corrected whenever practicable. Therefore, PHS will normally inform the grantee of the deficiency and provide sufficient opportunity for it to be corrected.

A decision by a PHS awarding office to terminate a grant may be made if appropriate corrective action (or the acceptable promise of such action) is not taken during the period of suspension or if the deficiency is so serious as to warrant immediate termination. Immediate termination action may also be taken if deemed to be in the best interest of the Government. 45 CFR Part 74, Subpart M, and 45 CFR Part 92.43 contain the policies that pertain to suspension and termination. Termination for cause may be appealed under the PHS and HHS grant appeals procedure (see "Grant Appeals Procedures").

Grants may also be terminated by the grantee or by PHS with the consent of the grantee. If the grantee unilaterally terminates a portion of the grant, PHS may conclude that the remaining portion of the grant will not accomplish the purposes for which the grant award was made. In such cases, mutual agreement shall be sought to reinstate all or a part of the terminated portion or terminate the grant in whole. If neither of these agreements can be reached, PHS may initiate procedures to terminate the grant for cause. If a grant is terminated by PHS with the consent of the grantee, the grantee shall not incur new obligations for the terminated grant, or portion thereof, after the effective date of the termination. The grantee shall also cancel as many outstanding obligations as possible. PHS shall allow full credit to the grantee for the Federal share of the noncancelable obligations properly incurred by the grantee prior to termination.

Withholding of support means a decision not to make a noncompeting continuation award within a previously approved project period. Withholding may occur for the following justifiable reasons:

Where a noncompeting continuation award is denied (withheld) because the grantee failed to comply with the terms of a previous award, such a determination may be appealed by the grantee. See also section 4, "Public Policy Requirements, Debarment and Suspension."

HHS also has in effect regulations at 45 CFR Part 76 that provide for the debarment and suspension of individuals and institutions from eligibility to receive grants or other forms of financial assistance or contracts under HHS discretionary programs. (Also see Executive Order 12549, Debarment and Suspension.)

Whenever a grant or cooperative agreement is suspended or terminated for cause, or a noncompeting continuation award is withheld for failure to comply with the terms of a previous award, this information will be shared with other HHS components through the HHS Alert System in order that special precautions may be taken if the award of additional grants or cooperative agreements to that organization is contemplated. Sanctions imposed as a result of misconduct in science, including research, research training, and related activities funded by PHS, will also be reported to the HHS Alert System.

AUDIT

An audit is a systematic review or appraisal made to determine whether internal accounting and other control systems provide reasonable assurance that--

Any or all of these elements may be reviewed, at the discretion of the Federal Government, during or after PHS support of the activity. However, 45 CFR Part 74, Subpart H, and 45 CFR Part 92.26 require recipients to comply with OMB requirements for audits conducted by, or at the discretion of, the recipient. The OMB requirements explain the scope, frequency, and other aspects of the audit. OMB Circular A-128, Audits of State and Local Governments, contains the requirements for audits of governmental grantees.

OMB Circular A-133, Audits of Institutions of Higher Education and Other Nonprofit Institutions, issued March 8, 1990, establishes the audit requirements for institutions of higher education and other nonprofit institutions receiving Federal awards. The main features of this Circular are as follows:

PHS encourages those grantees that procure certified public accountant (CPA) services to carefully assess their procurement practices and ensure that their agreements with the CPA specify the extent of the audit to be performed, the auditing standards to be used, and the data to be provided in the reports. The grantee organizations should consider the following in awarding audit services contracts to CPA firms:

All recipients must submit copies of non-Federal audits to the National External Audit Resources, HHS Office of Audit Services, 323 West 8th Street, Lucas Place, Room 514, Kansas City, MO 64105.

See section 7 for the allowability of the costs of grantee (subgrantee)-initiated audits.

Recipients must follow a systematic method for ensuring timely and appropriate resolution of audit findings and recommendations, whether discovered as a result of Government-initiated or recipient-initiated audits.

Grantees are usually allowed 30 days from the date of request to respond to the responsible audit resolution official (Action Official) concerning audit findings. Failure to submit timely responses may result in cost disallowance or other actions by PHS or HHS. At the completion of the audit resolution process, the grantee will be notified of the Action Official's final decision. The grantee may appeal this decision according to the applicable appeals procedures (see "Grant Appeals Procedures"). Refunds owed to the Government as a result of audit disallowances must be made in accordance with instructions issued by the Action Official or finance office.

CLOSEOUT

PHS grants will be closed out as soon as possible after expiration of a grant that will not be extended or after termination of a grant in accordance with 45 CFR Part 74, Subpart M, and 45 CFR Part 92.50. Closeout includes timely submission of all required reports; disposition of real property, equipment, and supplies; adjustments for amounts due the grantee; and adjustments for amounts due PHS and in the hands of grantees for any reason, including unobligated balances. All required reports from grantees are due within 90 days of the end of grant support. The PHS awarding office will issue instructions concerning the disposition of unobligated balances in the hands of the grantee. For those organizations receiving their funds through the HHS Payment Management System (PMS), all final reports must be submitted to PMS and to the PHS awarding office as appropriate. It is the responsibility of the grantee to reconcile reports submitted to PMS and to the PHS awarding office. Closeout of a grant does not affect the requirements for equipment accountability or record retention nor does it affect the Federal Government's right to conduct an audit and recover amounts based on the results of the audit.

GRANT APPEALS PROCEDURES

HHS has a policy permitting grantees to appeal certain postaward adverse administrative decisions made by HHS officials (see 45 CFR Part 16).

PHS has established a first-level grant appeal procedure for discretionary grants and cooperative agreements that must be exhausted before an appeal may be filed with the HHS Appeals Board. The following adverse determinations may be appealed under the authority of 42 CFR Part 50, Subpart D:

As a first step in appealing an adverse determination, the grantee must submit a request for review to the appropriate PHS official indicating the nature of disagreement with the adverse determination and must follow the procedures contained in the notification concerning the information to be supplied. For appeals of adverse determinations under awards made by PHS regional offices and OASH staff offices, the requests must be submitted to the Director, Division of Grants and Contracts, ORM/OM/PHS, Room 17A-39, Parklawn Building, 5600 Fishers Lane, Rockville, MD 20857. For appeals of adverse decisions under awards made by the PHS headquarters agencies, the requests must be submitted to the appropriate agency head or designee.

The grantee's request for review must be postmarked no later than 30 days after the postmark of the written notification of the adverse determination.

A written decision based on the appeals committee's or board's findings will be prepared for the signature of the committee chairman and members. If the review committee's decision is adverse to the grantee or if a grantee's request for review is rejected on jurisdictional grounds, the grantee has the option of submitting a request to the Departmental Appeals Board for a further review of the case by that board in accordance with the provisions of 45 CFR Part 16. (See also section 4, "Debt Collection.")

Disputes related to the establishment of indirect cost rates, research patient care rates, and certain other cost allocations used in determining amounts to be reimbursed under PHS grants--e.g., cost allocation plans negotiated with State or local governments; computer, fringe benefit, and other negotiated special rates--may be appealed in accordance with the HHS procedures contained in 45 CFR Part 75. That regulation establishes the first level of review by the Regional Director in each HHS regional office. If the decision under 45 CFR Part 75 is adverse to the grantee, it may request a further review by the Departmental Appeals Board under 45 CFR Part 16.

Because the jurisdiction of the PHS Grant Appeals Board (42 CFR Part 50, Subpart D) differs from that of the HHS Appeals Board (45 CFR Part 16) in several respects, two levels of appeal are not always available to grantees. The jurisdiction of the PHS Board is limited to discretionary project programs and to the adverse administrative determinations stated above.

PHS POLICY RELATING TO DISTRIBUTION OF
UNIQUE RESEARCH RESOURCES PRODUCED
WITH PHS FUNDING

Investigators conducting biomedical research frequently develop unique research resources. Categories of these resources include synthetic compounds, organisms, cell lines, viruses, cell products, and cloned DNA as well as DNA sequences, mapping information, crystallographic coordinates, and spectroscopic data. Specific examples include specialized and/or genetically defined cells, including normal and diseased human cells; monoclonal antibodies; hybridoma cell lines; microbial cells and products; viruses and viral products; recombinant nucleic acid molecules; DNA probes; nucleic acid and protein sequences; certain types of animals such as transgenic mice; and intellectual property such as computer programs.

It is the policy of PHS to make available to the public the results and accomplishments of the activities that it funds. Restricted availability of unique resources upon which further studies are dependent can impede the advancement of research and the delivery of medical care. Therefore, when these resources are developed with PHS funds and the associated research findings have been published or after they have been provided to the agencies under contract, it is important that they be made readily available for research purposes to qualified individuals within the scientific community. This policy applies to grants, cooperative agreements, and contracts.

Investigators who believe that they will be unable to implement this policy should promptly contact the appropriate PHS Program Administrator to discuss the circumstances, obtain information that might facilitate compliance with the policy, and reach an understanding in advance of the subsequent award. In order to facilitate the availability of unique or novel biological materials and resources developed with PHS funds, investigators may distribute the materials through their own laboratory or institution or submit them, if appropriate, to entities such as the American Type Culture Collection or other repositories. In the case of unique biological information such as DNA sequences or crystallographic coordinates, investigators are expected to submit them to the appropriate data banks, because they otherwise are not truly accessible to the scientific community. When distributing unique resources, investigators are to include pertinent information on the nature, quality, or characterization of the materials.

Investigators must exercise great care to ensure that resources involving human cells or tissues do not identify original donors or subjects, directly or through identifiers such as codes linked to the donors or subjects.

The goal of some programs, e.g., the Human Genome Program, are such that applicants for certain projects may be required to discuss plans for the sharing of data and materials in their applications. These plans will undergo review by program staff and any applicable national advisory council prior to award.

Distribution Costs

Institutions and investigators may charge the requester, if necessary, for the reasonable cost of production of unique biological materials and for packaging and shipping. Such costs may include personnel, supplies, and other directly related expenses. Investigators should note, however, that such a charge accrues as general program income. This should not be an impediment to the distribution of materials, but investigators and institutions are advised that, for grants and cooperative agreements, the income is governed by 45 CFR Parts 74 and 92 and must be reported on the FSR. Questions regarding these policies and the treatment of income should be directed to the awarding office GMO.

Inventions and Commercialization

Federal policy encourages the commercialization of the products of research developed as a consequence of Federal funding; therefore, the intent of this policy is not to discourage, impede, or prohibit the organization that develops unique research resources or intellectual property from commercializing the products. Investigators may make their materials available to others with appropriate restrictions and licensing terms as they and their institutions deem necessary.

Institutions are reminded that some of these products may be inventions subject to the various laws and regulations applicable to patents and need to be reported. The terms for licensing of unpatented research products such as cell lines, monoclonal antibodies, and other materials and products should generally be no more restrictive than would have been the case had they been patented, for example, only if there is full public disclosure of the invention/discovery, availability through a repository, and written agreement to end all fees and constraints after 17 years. When reporting is required, it should occur at the earliest possible time. (See Public Law 96-517, Public Law 98-620, and 37 CFR Part 401.)


(1) In the case of awards from multiple PHS awarding offices, the required documents should be submitted to the Grants Policy Branch, OASH, Room 17A-45, Parklawn Building, 5600 Fishers Lane, Rockville, MD 20857

(2) Policy regarding postaward changes to construction grants is specified on page 8-8.

(3) For subgrants and contracts under grants, the prior approval authority is usually the grantee. However, the grantee may not approve any action or cost that is inconsistent with the purpose or terms of the Federal grant. If an action by a subgrantee or contractor will result in a change in the overall grant project or budget requiring granting agency approval, the grantee shall obtain that approval from PHS before giving its approval to the subgrantee or contractor.

(4) For this purpose, "data" means writings, films, sound recordings, pictorial reproductions, drawings, designs, or other graphic representations, procedural manuals, forms, diagrams, work flow charts, equipment descriptions, data files, data processing or computer programs, statistical records, and other research data.



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