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Recipient organizations are expected to have systems, policies, and procedures in place by which they manage funds and activities. Recipients may use their existing systems to manage NIH grant funds and activities as long as they are consistently applied regardless of the source of funds and meet the standards and requirements set forth in 45 CFR 75 and the NIHGPS. NIH may review the adequacy of those systems and may take appropriate action, as necessary, to protect the Federal government's interests, including, but not limited to, the use of special terms and conditions. NIH also will oversee the recipient's systems as part of its routine post-award monitoring. The recipient's systems also are subject to audit (see Administrative Requirements-Monitoring-Audit).
NIH seeks to foster within recipient organizations an organizational culture that is committed to compliance, leading to both exemplary research and exemplary supporting systems and use of resources to underpin that research. Actions to achieve this result should include a clear delineation of the roles and responsibilities of the organization's staff, both programmatic and administrative; written policies and procedures; training; management controls and other internal controls; performance assessment; administrative simplifications; and information sharing.
Recipients are required to meet the standards and requirements for financial management systems set forth or referenced in 45 CFR 75.302, as applicable. The standards and requirements for a financial management system are essential to the grant relationship. NIH cannot support the research unless it has assurance that its funds will be used appropriately, adequate documentation of transactions will be maintained, and assets will be safeguarded.
Recipients must have in place accounting and internal control systems that provide for appropriate monitoring of grant accounts to ensure that obligations and expenditures are reasonable, allocable, and allowable. In addition, the systems must be able to identify large unobligated balances, accelerated expenditures, inappropriate cost transfers, and other inappropriate obligation and expenditure of funds. Recipients must notify NIH when problems are identified.
A recipient's failure to establish adequate control systems constitutes a material violation of the terms of the award. Under these circumstances, NIH may include special conditions on awards or take any of the range of actions specified in Administrative Requirements-Enforcement Actions, as necessary and appropriate.
Program income is gross income-earned by a recipient, a consortium participant, or a contractor under a grant-that was directly generated by the grant-supported activity or earned as a result of the award. Program income includes, but is not limited to, income from fees for services performed; charges for the use or rental of real property, equipment or supplies acquired under the grant; the sale of commodities or items fabricated under an award; charges for research resources; registration fees for grant-supported conferences, and license fees and royalties on patents and copyrights. (Note: Program income from license fees and royalties from copyrighted material, patents, and inventions is exempt from reporting requirements unless otherwise specified in the terms and conditions of award.) The requirements for accountability for these various types of income under NIH grants are specified in this subsection. Accountability refers to whether NIH will specify how the income is to be used and whether the income needs to be reported to NIH and for what length of time. Unless otherwise specified in the terms and conditions of the award, NIH recipients are not accountable for program income accrued after the period of grant support.
NIH applies the additive alternative to all recipients, including for-profit entities, unless there is a concern with the recipient or activity and NIH uses special terms and conditions, or the program requires a different program income alternative. NIH may require a different use of program income if a recipient has deficient systems; if the PD/PI has a history of frequent, large annual unobligated balances on previous grants; or if the PD/PI has requested multiple extensions of the final budget period of the project period. Regardless of the alternative applied, program income may be used only for allowable costs in accordance with the applicable cost principles and the terms and conditions of the award. Each NoA will indicate the allowable treatment of program income. Program income alternatives and their usage are noted below in Exhibit 9.
Consortium agreements and contracts under grants are subject to the terms of the agreement or contract with regard to the income generated by the activities, but the terms specified by the recipient must be consistent with the requirements of the grant award. Program income must be reported by the recipient as discussed in this subsection.
The amount of program income earned and the amount expended must be reported on the appropriate annual financial report, currently the FFR. Any costs associated with the generation of the gross amount of program income that are not charged to the grant should be deducted from the gross program income earned, and the net program income should be the amount reported. Program income must be reported in the Program Income section of the FFR (lines 10 L - O). (See Administrative Requirements-Monitoring-Reporting-Financial Reporting.) For awards under SNAP, the amount of program income earned must be reported in the non-competing continuation progress report.
Income resulting from royalties or licensing fees is generally exempt from reporting as program income.
When applicable, income earned from the sale of equipment must be reported on the FFR for the period in which the proceeds are received in accordance with the reporting requirements for the program income alternative specified. Amounts due NIH for unused supplies must be reflected as a credit to the grant on the FFR using line 10 m.
Reporting requirements for accountable income accrued after grant support ends will be specified in the NoA.
Exhibit 9. Use and Applicability of Program Income Alternatives
|Program income alternative||Use of program income||Applicability|
|Additive Alternative||Added to funds committed to the project or program and used to further eligible project or program objectives.||Applies to all NIH awards unless there is a concern with the recipient or activity or the program requires a different alternative.|
|Deductive Alternative||Deducted from total allowable costs of the project or program to determine the net allowable costs on which the Federal share of costs will be based.||Available for use by NIH programs on an exception basis.|
|Combination Alternative||Uses all program income up to (and including) $25,000 as specified under the additive alternative and any amount of program income exceeding $25,000 under the deductive alternative.||Available for use by NIH programs on an exception basis.|
|Matching Alternative||Used to satisfy all or part of the non-Federal share of a project or program.||Available for use by NIH programs that require matching.|
The requirements that apply to the sale of real property are addressed in the Construction Grants chapter. For equipment and supplies purchased under NIH grants for basic or applied research by non-profit institutions of higher education or non-profit organizations whose principal purpose is the conduct of scientific research, the recipient is exempt from any requirement to account to NIH for proceeds from the sale of the equipment or supplies; however, NIH has certain rights with respect to such property as specified in Administrative Requirements-Management Systems and Procedures-Property Management System Standards.
All other types of grants and recipients are subject to the requirements in 45 CFR 75.320 and 75.439 if title to the equipment vests in the recipient rather than in NIH. If the grant-supported project or program for which equipment was acquired is still receiving NIH funding at the time of sale, the recipient must credit the NIH share of the proceeds to the grant and use that amount under the deductive alternative for program income. If the recipient is no longer receiving NIH grant support, the amount due should be paid in accordance with instructions from NIH. These grants and recipients also are subject to the requirements in 45 CFR 75.321 and 75.453 with respect to the use or sale of unused supplies. If the recipient retains the supplies for use on other than federally sponsored activities, an amount is due NIH as if they were sold.
NIH recipients do not have to report program income resulting from royalties or licensing fees from sale of copyrighted material unless specific terms and conditions of the award provide otherwise. The NoA may include special terms and conditions if commercialization of an invention is an anticipated outcome of a research project.
However, the regulations implementing the Bayh-Dole Act (37 CFR 401.14(h)) require reporting of income resulting from NIH-funded inventions and patents. Specifically, as part of the annual invention utilization report, recipients must report income generated by all subject inventions to which title has been elected and by inventions such as research tools that have been licensed but not patented (see Administrative Requirements-Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources and Administrative Requirements-Monitoring-Reporting).
Generally, recipients may use their own property management policies and procedures for property purchased, constructed, or fabricated as a direct cost using NIH grant funds, provided they observe the requirements in 45 CFR Parts 75.316 through 75.323, as applicable, and the following. State governments will use, manage, and dispose of equipment acquired under a grant in accordance with state laws and procedures as specified in 45 CFR 92.32.
The dollar threshold for determining the applicability of several of the requirements in those regulations is based on the unit acquisition cost of an item of equipment. As defined in 45 CFR 75.2, the acquisition cost of an item of equipment to the recipient includes necessary modifications and attachments 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 in Part I), any required NIH prior approval for equipment must be observed for each item. However, the aggregate acquisition cost of an operating piece of equipment will be used to determine the applicable provisions of 45 CFR 75.320. If property is fabricated from individual component parts, each component must itself be classified as equipment if it meets the definition of equipment. In this case, the aggregate acquisition cost of the resulting piece of equipment will determine the appropriate accountability requirements in 45 CFR part 75.320.
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 also must follow appropriate procurement procedures in acquiring property as specified in Administrative Requirements-Management Systems and Procedures-Procurement System Standards and Requirements.
Recipients of NIH grants other than Federal institutions cannot be authorized to use Federal supply sources.
See Construction Grants-Real Property Management Standards in IIB for requirements that apply to the acquisition, use, and disposition of real property. Fixed equipment that is part of a construction grant is subject to those requirements.
In general, title to equipment and supplies acquired by a recipient with NIH funds vests in the recipient upon acquisition, subject to the property management requirements of 45 CFR Parts 75.317, 75.320, 75.321, and 75.323. Limited exceptions to these general rules are States, which may use, manage, and dispose of equipment acquired under a grant in accordance with State laws and procedures, and certain research grant recipients with exempt property (see 45 CFR 75.326). These requirements do not apply to equipment for which only depreciation or use allowances are charged, donated equipment, or equipment acquired primarily for sale or rental rather than for use.
Under the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 6306, NIH may permit non-profit institutions of higher education and non-profit organizations whose primary purpose is the conduct of scientific research to obtain title to equipment and supplies acquired under grants for support of basic or applied scientific research without further obligation to the Federal government. However, there is one exception: NIH has the right to require transfer of title to equipment with an acquisition cost of $5,000 or more to the Federal government or to an eligible third party named by the NIH awarding IC under the conditions specified in 45 CFR 75.319. NIH may exercise this right within 120 days of the completion or termination of an award or within 120 days of receipt of an inventory, as provided in 45 CFR 75.320(e)(2), whichever is later.
All other equipment and supplies acquired under all other NIH grant-supported projects by any other type of recipient are subject to the full range of acquisition, use, management, and disposition requirements of 45 CFR Parts 75.320 and 75.321. Property acquired or used under an NIH grant-supported project, including any federally owned property, also is subject to the requirements for internal control specified in 45 CFR 75.303. Pursuant to 45 CFR 75.323, equipment (and intangible property and debt instruments) acquired with, or improved with, NIH funds must not be encumbered without NIH approval.
The recipient's management system for equipment must meet the requirements of 45 CFR part 75.320(d), which include the following:
For items of equipment having a unit acquisition cost of $5,000 or more, NIH has the right to require transfer title to the equipment to the Federal government or to an eligible third party named by the NIH awarding IC under the conditions specified in 45 CFR 75.320(e)(3). Such transfer shall be subject to the following standards: (1) The equipment shall be appropriately identified in the award or otherwise made known to the recipient in writing. (2) The awarding IC may require submission of a final inventory that lists all equipment acquired with NIH funds and federally-owned equipment. (3) If the awarding IC fails to issue disposition instructions within 120 calendar days after receipt of the inventory or if so instructed, the recipient shall sell the equipment and reimburse the HHS awarding agency an amount computed by applying to the sales proceeds the percentage of HHS share in the cost of the original project or program. However, the recipient shall be permitted to deduct and retain from the NIH share $500 or ten percent of the proceeds, whichever is less, for the recipient's selling and handling expenses. If the recipient is instructed to ship the equipment elsewhere, the recipient shall be reimbursed by the awarding IC an amount which is computed by applying the percentage of the recipient's share in the cost of the original project or program to the current fair market value of the equipment, plus any reasonable shipping or interim storage costs incurred. If the recipient is instructed to otherwise dispose of the equipment, the recipient will be reimbursed by the HHS awarding agency for such costs incurred in its disposition. If the recipient's project or program for which or under which the equipment was acquired is still receiving support from the same HHS program, and if the HHS awarding agency approves, the net amount due may be used for allowable costs of that project or program. Otherwise the net amount must be remitted to the HHS awarding agency by check. This right applies to nonexempt property acquired by all types of recipients, including Federal institutions, under all types of grants under the stipulated conditions.
If there is a residual inventory of unused supplies exceeding $5,000 in aggregate fair market value upon termination or completion of the grant and if the supplies are not needed for other federally sponsored programs or projects, the recipient may either retain them for use on other than federally sponsored activities or sell them, but, in either case, the recipient must compensate the NIH awarding IC for its share as a credit to the grant.
Recipients of NIH grants 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 the terms and conditions of the award provide otherwise.
As permitted under Federal property management statutes and regulations and NIH property management policies, federally owned tangible personal property may be made available to recipients under a revocable license agreement. The revocable license agreement between NIH and the recipient provides for the transfer of the equipment for the period of grant support under the following conditions:
Recipients may acquire a variety of goods or services in connection with a grant-supported project, ranging from those that are routinely purchased goods or services to those that involve substantive programmatic work. States may follow the same policies and procedures they use for procurements from non-Federal funds and ensure that every purchase order or other contract includes any clauses required by 75.335. All other recipients must follow the requirements in 45 CFR parts 75.327 through 75.335 for the purchase of goods or services through contracts under grants. (Note: OMB has provided a one-year grace period for implementation of these subsections for IHEs and nonprofit organizations. Thus, these requirements are expected to take effect for these entities for their first fiscal year after December 26, 2015.) The requirements for third-party activities involving programmatic work are addressed under Consortium Agreements chapter in IIB.
A contract under a grant must be a written agreement between the recipient and the third party. The contract must, as appropriate, state the activities to be performed; the time schedule; the policies and requirements that apply to the contractor, including those required by 45 CFR 75, Appendix II - Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and other terms and conditions of the grant (these may be incorporated by reference where feasible); the maximum amount of money for which the recipient 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 recipient's overall responsibility for the direction of the project and accountability to the Federal government. Therefore, the agreement must reserve sufficient rights and control to the recipient to enable it to fulfill its responsibilities.
When a recipient enters into a service-type contract in which the term is not concurrent with the budget period of the award, the recipient may charge the costs of the contract to the budget period in which the contract is executed even though some of the services will be performed in a succeeding period if the following conditions are met:
However, costs will be allowable only to the extent that they are for services provided during the period of NIH support. To limit liability if continued NIH funding is not forthcoming, it is recommended that recipients insert a clause in such contracts of $100,000 or less stipulating that payment beyond the end of the current budget period is contingent on continued Federal funding. The contract provisions prescribed by 45 CFR 75, Appendix II - Contract Provisions for Non-Federal Entity Contracts Under Federal Awards, paragraph B specify termination provisions for contracts in excess of $100,000.
The procurement standards in 45 CFR 75.333 allow NIH to require approval of specific procurement transactions under the following circumstances (and provide a mechanism for governmental recipients to be exempt from this type of review):
When NIH prior approval is required, the recipient must make available sufficient information to enable review. This may include, at NIH discretion, presolicitation technical specifications or documents, such as requests for proposals or invitations for bids, or independent cost estimates. Approval may be deferred pending submission of additional information by the applicant or recipient or may be conditioned on the receipt of additional information. Any resulting NIH approval does not constitute a legal endorsement of the business arrangement by the Federal government nor does such approval establish NIH as a party to the contract or any of its provisions.
Recipients must make positive efforts to use small businesses, minority-owned firms, and women's business enterprises as sources of goods and services whenever possible. Recipients should take the steps outlined in the applicable administrative requirements (45 CFR 75.330) to implement this policy.