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OFFICE OF MANAGEMENT AND BUDGET
Governmentwide Grants Management Requirements
AGENCY: Office of Management and Budget.
ACTION: Final Revision of OMB Circulars A-21, A-87, A-102, A-110 and A-122 and Interim
Final Revision of OMB Circular A-110.
SUMMARY: The Office of Management and Budget (OMB) is issuing final revisions to five
OMB circulars and, in addition, OMB is issuing interim final amendments to one of these circulars
to reflect the Single Audit Act Amendments of 1996. The five Circulars are A-21 ("Cost
Principles for Educational Institutions"), A-87 ("Cost Principles for State and Local
Governments"), A-102 ("Grants and Cooperative Agreements with State and Local
Governments"), A-110 ("Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations"), and A-122
("Cost Principles for Non-Profit Organizations"). The purpose of these revisions is to provide a
conditional exemption from OMB's grants management requirements and a conditional class
deviation from the agencies' Grants Management Common Rule for certain Federal grant
programs with statutorily-authorized consolidated planning and consolidated administrative
funding, that are identified by a Federal agency and approved by the head of the Executive
department or establishment. Additionally, OMB is issuing interim final conforming amendments
to Circular A-110 to reflect the enactment of the Single Audit Act Amendments of 1996, the
recent rescission of OMB Circular A-128 ("Audits of State and Local Governments"), and the
consolidation of its provisions in a revised OMB Circular A-133, "Audits of States, Local
Governments, and Non-Profit Organizations."
DATES: The final revisions and interim final amendments are effective [30 days after
publication]. All comments on the interim final amendments should be in writing and must be
received by [60 days from publication]. Late comments will be considered to the extent
practicable.
ADDRESSES: Comments should be mailed to Grants Management Audit Docket, Office of
Federal Financial Management, Office of Management and Budget, Room 6025 New Executive
Office Building, Washington, DC 20503. Electronic mail (E-mail) comments may be submitted via
the Internet to kahlow_b@a1.eop.gov. Please include the full body of E-mail comments in the
text of the message and not as an attachment. Please include the name, title, organization, postal
address, and E-mail address in the text of the message.
FOR FURTHER INFORMATION CONTACT: Barbara F. Kahlow, Office of Financial Federal Financial Management, Office of Management and Budget, (202) 395-3053. The revised OMB Circulars A-21, A-87, A-102, A-110, and A-122 are available electronically on the OMB Home Page at /OMB. These revised Circulars are also available in paper format by contacting the OMB Publications Office at (202) 395-7332. SUPPLEMENTARY INFORMATION: On May 14, 1997, the Office of Management and
Budget (OMB) proposed a revision (62 FR 26577) of OMB Circulars A-21, "Cost Principles for
Educational Institutions," A-87, "Cost Principles for State and Local Governments," A-102,
"Grants and Cooperative Agreements with State and Local Governments," A-110, "Uniform
Administrative Requirements for Grants and Agreements with Institutions of Higher Education,
Hospitals, and Other Non-Profit Organizations," and A-122, "Cost Principles for Non-Profit
Organizations." The proposal would provide a conditional exemption from OMB's grants
management requirements and a conditional class deviation from the agencies' Grants
Management Common Rule (GMCR) for certain Federal grant programs with
statutorily-authorized consolidated planning and consolidated administrative funding, that are
identified by a Federal agency and approved by the head of the Executive department or
establishment.
This exemption could be granted to related Federal non-entitlement grant programs which are
administered by State and local governments and which have the following characteristics: the
related programs (1) serve a common program purpose, (2) have specific statutorily-authorized
consolidated planning and consolidated administrative funding, and (3) are administered by State
agencies which are funded mostly by non-Federal sources. In order to promote efficiency in the
State and local program administration of such related programs, Federal agencies could exempt
these covered State-administered, non-entitlement grant programs from Federal grants
management requirements in OMB Circulars A-21, A-87, A-110, and A-122, and the GMCR.
The exemptions would be from all but the allocability-of-costs provisions of Circulars A-21
(Section C, subpart 4), A-87 (Attachment A, subsection C.3), and A-122 (Attachment A,
subsection A.4), and from all of the administrative requirements provisions of Circular A-110 and
the GMCR.
A Federal agency would have the discretion to exempt a Federal grant program from the Federal
grants management requirements. A Federal agency shall consult with OMB during its
consideration of whether to grant such an exemption.
If a Federal agency exempts a Federal grant program from these requirements, a State would only
qualify if it adopts its own written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions of OMB Circular A-87, and
extends such requirements to all subrecipients. These fiscal and administrative requirements must
be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal
statutory and regulatory provisions, costs are reasonable and necessary for operating these
programs, and funds are not to be used for general expenses required to carry out other
responsibilities of a State or its subrecipients. If a State does not adopt such fiscal and
administrative requirements, then it would continue to be subject to the Federal grants
management requirements.
Response to Comments OMB received eight comment letters: three from Federal agencies, one from a local government,
two from universities, one from a non-profit organization, and one from an interest group.
Four of the letters did not address the substance of the proposed revisions. The letter from the
local government asked if the proposal had any relationship to the recent revision of OMB
Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations," on June
24, 1997 (62 FR 35278); in response to this question, these revisions are not related to that
revision of Circular A-133. The letter from the non-profit organization raised concerns about
certain other provisions in OMB Circular A-122 which are unrelated to the proposal; OMB will
consider these concerns in connection with its review of Circular A-122. A letter from one of the
Federal agencies requested an unrelated change to the GMCR and OMB Circular A-110; the issue
raised will be considered during OMB's future review of those provisions. A letter from another
Federal agency raised concerns about OMB's denial of certain other, unrelated waiver requests
from that agency which would have been applicable only to that agency's grant programs.
The other four letters addressed the substance of the proposed revisions. The interest group
commenter supported the proposed revisions and recommended that the flexibility afforded to
State-administered programs be extended to local-administered programs. This recommendation
for flexibility for local-administered programs will be considered during OMB's future review of
the five circulars.
The two university commenters objected to the proposal because of its possible effect on those
subrecipients, including subcontractors, that are universities. Specifically, the university
commenters preferred to be subject only to OMB Circulars A-21 and A-110 (and not also to State
grants management requirements) because "We have found that state government does not always
do a good job communicating to us what the guidelines are for a given program." The university
commenters stated that they are familiar with Circulars A-21 and A-110 and "have systems in
place to deal with them." Finally, the Federal agency commenter found the proposal unclear and
felt that "the funding agency needs to have not only accountability, but also the consistent
accountability afforded by currently imposed Federal cost principles and uniform administrative
requirements." The commenter raised a concern about the possible inefficiency of having more
than one State grants management system, with one for exempted grant programs (and other
State programs), and one for the rest of the Federal grant programs.
OMB would also be concerned if the proposed changes increased burden on State grantees or
their subrecipients, as the three commenters apparently believed. However, State grants
management requirements instead of Federal grants management requirements currently apply to
several previously-exempted Federal programs as well as to State-funded programs which have
no Federal funding. In 1981 and 1982, OMB waived the application of Circulars A-21, A-87,
A-102, A-110, and A-122 for certain, selective State-administered programs. As a consequence,
OMB believes that the addition of programs with shared, statutorily-authorized consolidated
planning and consolidated administrative funding with these already-exempted programs would
not result in additional burden on subrecipients and would not result in increased inefficiency.
Since OMB does not believe that any negative effects on grantees or subrecipients will ensue from
the proposed revisions, OMB is finalizing them.
Accordingly, to provide such a conditional exemption, OMB is adopting the proposed revisions
and amending: Section A.3 of Circular A-21; Attachment A Section A.3 of Circular A-87;
Section 2 of Circular A-102; Subpart C of Circular A-110 (as a new Section __.29 instead of as
Section __.45 as proposed); and, Attachment A Section A of Circular A-122. The amendments
are set forth below.
Interim Final Conforming Amendments In addition to adopting the proposed revisions to the five circulars, OMB is also making
conforming amendments to Circular A-110 to reflect the enactment of the Single Audit Act
Amendments of 1996 (Public Law 104-156, 110 Stat. 1396) and OMB's rescission of Circular
A-128 ("Audits of State and Local Governments") and its issuance of the June 24, 1997, revision
of OMB Circular A-133 (62 FR 35278, June 30, 1997). The provisions of the 1996 Act and of
the revised Circular A-133 apply to audits of fiscal years beginning after June 30, 1996. The
revised Circular A-133 co-locates audit requirements for States, local governments, and
non-profit organizations. As a consequence, OMB rescinded OMB Circular A-128.
Currently, Circular A-110 refers to the Single Audit Act of 1984 (which was superseded by the
1996 Act), to Circular A-128 (which was rescinded), and to the former version of OMB Circular
A-133 (which covered only non-profit organizations, and did not cover State and local
governments). These interim final conforming amendments update these references. Additional
conforming changes were made to conform with the 1996 Act and revised Circular A-133 (e.g.,
to reflect that, under the 1996 Act, all non-profit hospitals are now subject to the Act).
OMB has determined, under 5 U.S.C. 553(b)(B), that good cause exists to issue these conforming
amendments on an interim final basis. The conforming amendments update the references to the
applicable statute and circulars, by replacing the superseded references with current ones.
Moreover, under the Single Audit Act Amendments of 1996, the provisions of the 1996 Act
(which are reflected in the revised OMB Circular A-133) provide standards that are effective for
audits of fiscal years beginning after June 30, 1996. Accordingly, OMB has determined that
issuing a proposal for comment on these conforming amendments would be "impractical,
unnecessary, and contrary to the public interest."
Availability of Revised Circulars OMB has prepared updated versions of the five circulars, as amended herein. The revised OMB
Circulars A-21, A-87, A-102, A-110, and A-122, as amended herein, are available electronically
on the OMB Home Page at /OMB. These revised Circulars,
as amended herein, are also available in paper format by contacting the OMB Publications Office
at (202) 395-7332.
Joseph J. Minarik,
1. OMB hereby amends Circulars A-21, A-87, A-102, A-110, and A-122 by adding the three
paragraphs that follow, regarding "Conditional exemptions," at the specified places in each
Circular: (1) as a new paragraph d under A.3 Purpose and Scope, Application of Circular A-21;
(2) as a new paragraph e under Attachment A, A.3 Purpose and Scope, Application of Circular
A-87; (3) as a new paragraph j under Section 2, Post-award Policies of Circular A-102; (4) as a
new Section __.29 under Subpart C, Post-award Requirements of Circular A-110; and, (5) as a
new paragraph 7 under Attachment A, A. Basic Considerations of Circular A-122:
Conditional exemptions. (1) OMB authorizes conditional exemption from OMB administrative
requirements and cost principles circulars for certain Federal programs with statutorily-authorized
consolidated planning and consolidated administrative funding, that are identified by a Federal
agency and approved by the head of the Executive department or establishment. A Federal agency
shall consult with OMB during its consideration of whether to grant such an exemption.
(2) To promote efficiency in State and local program administration, when Federal
non-entitlement programs with common purposes have specific statutorily-authorized
consolidated planning and consolidated administrative funding and where most of the State
agency's resources come from non-Federal sources, Federal agencies may exempt these covered
State-administered, non-entitlement grant programs from certain OMB grants management
requirements. The exemptions would be from all but the allocability of costs provisions of OMB
Circulars A-87 (Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian
Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for Educational Institutions,"
and A-122 (Attachment A, subsection A.4), "Cost Principles for Non-Profit Organizations," and
from all of the administrative requirements provisions of OMB Circular A-110, "Uniform
Administrative Requirements for Grants and Agreements with Institutions of Higher Education,
Hospitals, and Other Non-Profit Organizations," and the agencies' grants management common
rule.
(3) When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this
option, a State must adopt its own written fiscal and administrative requirements for expending
and accounting for all funds, which are consistent with the provisions of OMB Circular A-87, and
extend such policies to all subrecipients. These fiscal and administrative requirements must be
sufficiently specific to ensure that: funds are used in compliance with all applicable Federal
statutory and regulatory provisions, costs are reasonable and necessary for operating these
programs, and funds are not be used for general expenses required to carry out other
responsibilities of a State or its subrecipients.
2. OMB hereby amends paragraphs (a), (b) and (c) of Section __.26 of OMB Circular A-110 to
read as follows:
___.26 Non-Federal audits.
(a) Recipients and subrecipients that are institutions of higher education or other non-profit
organizations (including hospitals) shall be subject to the audit requirements contained in the
Single Audit Act Amendments of 1996 (31 USC 7501-7507) and revised OMB Circular A-133,
"Audits of States, Local Governments, and Non-Profit Organizations."
(b) State and local governments shall be subject to the audit requirements contained in the Single
Audit Act Amendments of 1996 (31 USC 7501-7507) and revised OMB Circular A-133, "Audits
of States, Local Governments, and Non-Profit Organizations."
(c) For-profit hospitals not covered by the audit provisions of revised OMB Circular A-133 shall
be subject to the audit requirements of the Federal awarding agencies.
Billing Code 3110-P
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