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| «GUIDELINES AND INFORMATION
FOR ASSISTING RMP's IN
PHASING OUT RMPS SUPPORT

4/73

 

APPLICABLE TO RMP ONLY
 

 

“ALLOWABLE COSTS.cecaccececsccerneeecenseserese seers eee

_ CONTENTS

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I.

II.

APPLICABLE TO RMP ONLY

GRANT ADMINISTRATION REQUIREMENTS

GENERAL RESPONSIBILITIES OF THE GRANTEE

The grantee is responsible for insuring compliance with all
Federal requirements. Specifically every grant must be adnin-
istered in accordance with (1) the Act, (2) the regulations
thereunder, (3), other applicable regulations (i.e@., Civil Rights),
and (4) written Federal policies (e.9+r the policies contained

in this Manual). Grantees are also responsible for advising
program staff, affiliates and all institutions and agencies
participating in.an RMP of the applicable Federal requirements
and. for instituting procedures to insure compliance.

Grantees are urged to safeguard their interests by requiring
that institutions and agencies participating in the RMP execute
a contract or affiliation agreement regarding the administration
of RMPS funds, It would be advisable for such an agreement

to include appropriate references to the Act, regulations and
this Manual, and, further, to provide for reimbursement of the
grantee in the event of audit liabilities incurred by others

in connection with carrying out the grant.

ASSURANCES

The signature of the applicant's authorized representative on
page 2 of the grant application provides assurance to the Federal

Government that the grantee will comply with the
following: |

1. Assurances specified in Sections 903 and 904 of the Act.

2. Civil Rights requirements.

RMPS grants must be administered in conformance with the

Civil Rights Act of 1964 and the regulation (45 CFR, Part 80)
issued. pursuant thereto by the Department of Health, Education,
and Welfare. Title VI of the Civil Rights Act of 1964 and the
Equal Employment Opportunity Act of 1972 state that no person in
the United States shall, on the ground of race, color, national
origin, or sex be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program
or activity receiving Federal financial assistance. Every RMPS
grantee organization is required to have an Assurance of Compliance
(Form HEW 441) on file with the Office for Civil Rights, Office
of the Secretary, DHEW, before a RMPS. grant may be made to that

institution.
GRANT ADMINISTRATION REQUIREMENTS

Grantees are responsible for insuring that all affiliates and
_othér institutions participating in the: RMP submit HRW-441 to the
grantee, where they have not already done so, and comply with
‘the assurances given. In addition, all organizations partici-
pating in an RMP must comply with Executive Order 11246, as
amended, and superseded by Executive Order 11375 and 11478,

-. respectively.

3. Requirement for care and treatment of laboratory animals.

A special assurance relating to animal care must be submitted
for any RMPS program staff or operational activity which in~

- yolves the use of animals for research or other purposes.
Institutions and organizations using. warm-blooded animals in
projects or activities supported with RMPS grant funds must
provide RMPS with written assurance that they will evaluate on

a continuing basis their facilities in regard to the maintenance
of acceptable standards for the care, use, and treatment of such
animals. - ,

The assurance must describe accreditation by a recognized
professional laboratory animal accrediting body or the establishment
of a committee, at least one of whose membership is a Doctor of
Veterinary Medicine, to evaluate the care of all warm-blooded
animals held or used for activities supported by RMPS grants, awards,
or contracts; and commit the institution to comply with applicable
portions of the Animal Welfare Act (PL 89-544, as amended) and to
follow the guidelines prescribed in DHEW Publication No. (NIH) ,73-23,
formerly PHS Publication No. 1024, "Guide for the Care and Use of

Laboratory Animals."
4. Requirement for protection of human subjects.

A plan for the protection of human subjects is required when
any individual would be. "at risk" = exposed to the possibility
of physical, psychological, sociological or other harm - as a
result of RMPS supported activities. No RMPS funds may be ex-
pended for such activities unless the required plan has been
approved. in addition written prior RMPS approval is required
before RMPS funds are utilized to support any activity involving
the use of human subjects for research or experimentation.

Specifically, where applicable, a plan for the protection of

human subjects must be submitted and approved in accordance

with Chapter 1-40 of the HEW Grants Administration Manual. The

plan must be applicable to the institution directly responsible for
the activity in question (i.e., the institution identified as the

2

 

eT

 
 

 

GRANT ADMINISTRATION REQUIREMENTS

project sponsor on pages 15 and 16 of an application, RMP-34-1).
No grant for an activity involving human subjects shall be made
unless the application for such support has been reviewed and
approved by an appropriate institutional committee.

The institution must submit to pMpS, for: its review, approval and
official acceptance, 4 written assurance of its compliance with this
policy. The institution must also provide with each proposal
involving human subjects a certification that it has been or will
be reviewed in accordance with the institution's assurance. This
certification must be renewed annually on the hasis of continuing
review of the supported project. Guidlines for the establishment
and operation of such a system are provided in DNFV
Publication No. (NIH) 72-102, the "Institutional Guide to DHEW
Policy on protection of Human Subjects," available from the Insti-
tutional Relations Section, Division of Research Grants, National
Institutes of Health, Bethesda, Maryland 20014.

PATENTS AND INVENTIONS

In accordance with Department of Health, Education, and Welfare
Regulations (45 CFR Subtitle A, Parts 6 and 8), all inventions

made in the course of or under any RMPS: grant shall be promptly

and fully reported to the Assistant Secretary for Health, Department
of Health, Education, and Welfare. Instructions for the proper
method of reporting should be requested from RMPS. Determination

as to ownership and disposition of invention rights, including
whether.a patent application shall be filed, and if so, the manner
of obtaining, administering, and disposing of rights under any
patent application or patent which may issue shall be made either:

a. by the Assistant Secretary for Health whose decision shall be
considered as final, or —

b, where the institution has a separate formal institutional

2

agreement with the Departme™”*, by the grantee institution in
accordance with such agreement.

Patent applications shall not be filed on inventions under (a) above
without prior written consent of the Assistant Secretary for Health
or his representative. Any patent application filed by the grantee
on an invention made in the course of or.under a RMPS grant shall
include the following statement in the first paragraph of the

specification:

"the invention described herein: was made in the .course of, or
under, a grant from the Health Services and Mental Health
administration, Department of Health, Education, and Welfare."
GRANT ADMINISTRATION REQUIREMENTS

A complete written disclosure. of each invention in the form
specified by the Assistant Secretary for Health, DHEW, shall

be made by the grantee promptly after conception or first

actual reduction to practice, and, in any event, prior to
publication. Upon request, the grantee shall furnish such duly
executed instruments (prepared by the Government) and such other
papers as are deemed necessary to vest in the Government the
rights reserved to it under this policy statement to enable’

the Government to apply for and prosecute any patent application,
in any country, covering each invention where the Government

has the right to file such application.

In addition to immediate reporting, grant application forms require
information pertaining to inventions conceived or actually reduced
to practice during a period of active RMPS grant support. If no
inventions were made, submission of a properly executed appli-
cation will provide the necessary certification to that effect
(i.e., on page 3 of Form RMPS 34-1), A Final Invention Statement

- and Certification (Form OS-489) is required within 30 days following
the end of support of an RMPS support activity. All inventions
which were conceived or first actually reduced to practice during
the course of work under the grant from the original effective

date of support through the date of completion, whether or not
previously reported, shall be listed on the Statement. Each Statement
will require the signature of the person responsible. for the grant
concerned and an institution official authorized to sign on behalf

of the institution.

%

The grantee shall obtain appropriate patent agreements to fulfill
the requirements of this provision from all persons who perform any
part of the work under the grant, except such clerical and manual
labor personnel as will have no access to technical data, and
“except as otherwise authorized in writing by the Department.

The grantee shall insert in any contract or agreement made under the
grant. which has experimental, duvelopmental, or research work as

one of its purposes, a clause making this provision applicable

to such contractor and its employees. Agreements shall also be
obtained by the grantee to govern disposition of rights to inventions
resulting from screening of compounds synthesized under the grant.

As used in this provision, the stated terms are defined as follows
for the purposes hereof:

a. “Invention” or "invention or discovery" includes any art,
‘machine, manufacture, design, or composition of matter, or —
any new and useful improvement thereof, or any variety df
plant, which is or may be patentable under the Patent Laws

of the United States.

 

 
IV.

Ve

vi.

GRANT ADMINISTRATION REQUIREMENTS .

b. "Made" when used in relation to any invention or discovery
means the conception or first actual reduction to practice
of such invention in the course of the grant.

RECORD KEEPING AND REPORTING

Accounting for grant funds will be in accordance with generally
accepted principles consistently applied, regardless of the
source of funds. All supporting records of project expenditures
must be compatible with RMPS reporting requirements.

All grantees and/or their affiliated jnstitutions are required

to maintain grant accounting records, identifiable by grant
number, until audit on pehalf of the Department or five years
after the end of the budget period, whichever is less. Accounting
records must contain adequate references for jdentifying and
locating original documents in support of direct costs. These in-
clude invoices, checks, time records, and payrolls, etc.

APPEALS PROCEDURES

APPEALS

the DHEW has 4 policy of permitting grantees to appeal certain
admministrative decisions which may result in adverse effects on
the grantee. There are two levels of appeal, an informal procedure
at the HSMHA level and a formal procedure involving 4 Grant Appeals

Board at the Department level. If an appeal js pursued, the

grantee must exhaust the informal procedure of HSMHA before appealing

to the Grant Appeals Board, office of the Secretary.

Decisions which may be appealed are: (1) termination for nonconform
with grant terms, (2) disallowance of an expenditure charged to a
grant, (3) a determination that the grantee has failed to account -
for grant funds, (4) voiding of a grant. award, (5) establishment of
indirect. cost or research hospital patient care rates, and (6) the
disapproval of a grantee's request for permission to incur an
expenditure during the term of a grant.

BONDING REQUIREMENTS

All non-profit organizations that are established solely for the
receipt and administration of an RMP grant must obtain fidelity
bond which will assure RMPS of the proper maintenance of Federal

funds.

A fidelity bond, as distinguished from burglary insurance provides
coverage solely for losses resulting from the dishonest acts of
employees of an organization, while burglary insurance coverage
other than such dishonest acts of employees of such organization.

ity

 
=

VII.

VIII.

' from non~Federally supported activities.

9, Obligation of funds derived from grant-related income

GRANT ADMINISTRATION REQUIREMENTS .

   
  

When an organization secures a fidelity bond, copies of such
must be furnished to RMPS prior to the issuance by RMPS of an
initial grant award to.a newly established non-profit organization.

Provision should be made that such coverage continue for the
length of RMPS support. The coverage secured must provide

for payment of the amount of the coverage in the result of

any defalcation to the United States of America - DHEW-PHS-RMPS.
The bond should normally provide theft insurance in the amount
of one month's normal draw of funds from the Federal treasury..

APPLICABILITY OF FEDERAL OR INSTITUTIONAL POLICIES
In the absence of any contrary provisions of the Law, regulations,
or written announced Federal policies, the institutional policies

of the grantee or the affiliate are applicable as prescribed by
the grantee.

Institutional policies applied to the management of grant funds
must apply equally to all institutional activities irrespective

of the source of funds. That is,the institution must have the
same policies for expenditures from grants as for expenditures

PRIOR APPROVALS

The following cost categories and types of activities require
prior approval by RMPS before such costs may he incurred for,
the purposes indicateds (See specific cost categories for details.)
1. Foreign travel

2. Certain categories of printing

3. Certain types of films and videotapes

4, New construction

5. Patient care |

6, Certain classes of drugs

7. End stage kidney disease

8. Activities jointly funded by two or more RMPs

10. Experimentation or other activities involving use of human
subjects -

6. \

 
GRANT ADMINISTRATION REQUIREMENTS

11. Alterations and renovations

12. Feasibility studies related to. “Health Maintenance
_ organizations" (HMOs).

The applicant or grantee is responsible for requesting approval
as necessary. This may be done by letter to RMPS.. In addition,
inclusion of costs in a final budget submitted to support an award
constitutes prior approval unless otherwise specified in the award.
APPLICABLE TO RMP ONLY

ALLOWABLE COSTS

I. GUIDE MATERIALS RELATING TO COSTS

Allowable costs under the RMP program are those specified
below and in the following HEW Guides or the Grants
Administration Manual.

1. "A Guide for Colleges and Universities-~Establish-
ing Indirect Cost Rates for Grants and Contracts
with the Department of Health, Education, and
Welfare." (OASC-1, Revised, or Grants Administration

. Manual, Chapter 2-65.)

2. "A Guide for Non-Profit Institutions, Cost Principles
and Procedures for Cost Rates for Grants and Contracts
with the Department of Health, Education, and Welfare."
(OASC-5,. Revised or Grants Administration Manual,

Chapter 1-76.)

3. "A Guide for State Government Agencies--Establishing
Cost Allocation Plans and Indirect Cost Rates for
Grants and Contracts with the Department of Health,
Education, and Welfare." (OASC-6 or Grants Adminis-
tration Manual, Chapter 5-60.)

4 "A Guide for Hospitals--Establishing Indirect Cost
Rates for Research Grants and Contracts with the D
Department of Health, Education, and Welfare."
’ YOASC-3 or Grants Administration Manual, Chapter 2-66.)

_ if. ALLOWABLE. COSTS

A. Use of List of Allowable and Not Allowable Costs
The following list of "allowable" and "not allowable" costs
covers those items most frequently encountered. The

stated policies apply unless otherwise specified in a
Notice of Grant Award, or other communication from RMPS.
Omission of a particular item of cost is not intended to
imply that the omitted item is either allowable or not

allowable.
B. Allowability of Costs

Advertising -~ Allowable to recruit staff for project,
procurement of scarce items used in conduct of project,

8
. ALLOWABLE COSTS

disposal of scrap or surplus materials and bid advertising
under construction grant programs.

Alteration and Renovation-- Allowable. Alteration and
renovation means work required to change the interior
arrangements or other physical characteristics of an
existing facility of installed (built-in) equipment,

so that it may be more effectively utilized for its
current designated purpose, or adapted to a changed

use, as a result of a programmatic requirement. Altera-
tions and Renovations may include work referred to as
improvements, conversion, rehabilitation, remodeling or -

- modernization. -

Under the law, RMPS participation in both construction
and alteration and renovation (including the costs of
built-in-equipment) is limited to 90% of the costs of

~ such construction or equipment.

Virtually all alterations and renovations supported
through RMPS. funds consists of rearrangement of space

‘through relocation of non load-bearing walls or parti-

tions and associated appurtenances, built-in equipment,
and/or utilities. Alteration and renovation of this
type should be classified as "Minor" in completing form
RMPS-34-1, page 16, “Financial Data Record."

Regions with triennial status do not require prior RMPS
approval to initiate alteration or renovation in the
amount of $25,000 or less RMPS costs. In all other
cases prior RMPS approval is required for alteration

and renovation.

Alteration and renovation costs requested in an approved
application require no further RMPS approvals.

Animals -- Charges for the acquisition, care, and use of
experimental animals are allowable.

Audits -- Allowable. Regional Medical Programs may schedule
independent audits by certified public accountants provided
it is grantee policy and not reimbursed as indirect costs.
However, the HEW Audit Agency reserves the right to perform
an audit regardless of whether an audit has been performed
by a certified public accountant.
ALLOWABLE COSTS

Bad Debts -- Not allowable.

Basic Education (Training) -- Allowable for student support
(tuition, stipends, ets.) and associated costs for training
of new types of health personnel. Student support for basic
education and training in established medical and allied
health professions (including internships and residencies)

is not allowable. The training institution may be reimbursed
for services rendered to an RMP activity by residents, -
interns or other students ,

A health profession is considered established if a Board of
Schools of the AMA Council on Medical Education, or some
similarly recognized mechanism, has been set up to approve schools,
outline standards for admission, curriculum requirements and
certification procedures, and/or if definitive formal educa-
tional programs in the particular health occupation have already
been instituted in the educational. and training systems of
hospitals, technical schools, junior and senior colleges.

Training of new types of health personnel is that training
which relates to newly. developing technologies or new modalities
of diagnosis and treatment for which no standard curriculum

is yet recognized, no minimum national standards for certifi-
cation or licesure are yet established and which is not
generally part of the regular offerings of the health-related
educational and training system of hospitals and/or technical
schools, junior and senior colleges. .

Bonus Payment -- Not allowable

Books and Periodicals -- Allowable as a direct cost where
‘required for the conduct of the project. Such items may be
allowable as indirect costs when obtained for libraries for
the general use of institutic: staff and students.

Communications -- Costs incurred for telephone services, local
and long distance telephone calls, telegrams, radiograms,
postage and the like, are allowable, provided that such costs
are necessary to the activity and not treated as indirect cost.

Computers -~ Allowable. Grant funds may be used to purchase
computer time, or if the needs of the program are sufficient,
the rental of a computer as with all other activities, the costs
of acquiring computer capability must be measured against the
penefits to be derived.

10

 

 

 
vy

 

ALLOWABLE COSTS

Computer Assisted EKG Analysis ~~ Effective March 7, 1972

not allowable to implement, equip or operate new computer
assisted electrocardiographic systems (CAE). Limited funding
is allowable, however, for specific organizational phases of

CAE system implementation. Such funding may assist in:

establishing working relationships between participants,

provision of technical consultation, and evaluation of the
CAE: proposal.

- RMpS funding is also allowable for specific CAE studies in

Regions that have the technological expertise, facilities, and
potential EKG volume necessary to support an economical CAE
system. Such staff support may take the form of participation

‘in assessment of needs resources and priorities; technical

consultation; organizational counseling; and institutional
liaison.

CAE. systems receiving RMPS support on.or before March 7, 1972
will be continued under the terms of their current approvals.

-pdditional support beyond the currently recommended period

s

of support is: subject to the restrictions stated above. (See

[NID Vol. 6, No. 35, 3/7/72.)

Construction ~~ Allowable after specific prior approval by

RMPS in an application. Construction as defined in the Act
means new construction of facilities for demonstrations,
research, and training when necessary to carry out regional
medical programs, alteration, major repair (to the extent
permitted by regulations), remodeling and renovation of
existing: buildings (including initial equipment thereof),
and replacement of obsolete, puilt-in (as determined in
accordance with regulations) equipment of existing
buildings. ,

New Construction includes the erection, installation or
assembly of a facility, including the expansion, addition,
extension of an existing facility which provides new floor
space, cubeage, OF applicable units of measurements; total
replacement of a facility and/or the physical relocation of
a facility from one location to another. For buildings and
structures, it may include site preparation, including
demolition, excavation, landfill, utility system connections
and extensions, site improvements such as roads, walks, parking
areas, landscaping, and exterior or interior real property
installed: (built-in) equipment. Completion of unfinished
space is to be treated as new construction.

11
ALLOWABLE COSTS

Under the Law, RMPS participation in both construction
and alteration and renovation (including the costs of

built-in equipment) is limited to 90% of the costs of

such.construction or equipment.

Accounting for costs of construction and alteration and
renovation shall be in accordance with the accounting
policy of the grantee institution, consistently applied
to all sponsors, regardless of the source of funds. The
grantee must maintain accounting records to reflect that
at least 10% of the project cost has been paid from the
institution or other non-Federal funds. the cost of the
facility, including construction project costs, must be
kept in a prime account so that the grantee can furnish
the following upon request:

a. Total receipts
b. Total disbursements

-c. Balance in thé account
\

d. Cost data as prescribed in the cost estimate outline.

Consultant Fees -- Consultant fees, including supporting
costs such as travel and per diem, are allowable. Consultant
Services must be procured and compensated in accordance with
institutional policies. ° .

An employee of the grantee or affiliate not normally employed
in connection with RMP, may be employed as a consultant by a
Regional Medical Program. In order to be paid a consultant
fee in addition to regular institutional salary, such
individual must perform services for the RMP which are in
addition to his regular duties and carried out beyond the
normal work week of the employing institution as defined

by that institution's policies.

 

Within institutional. policies, an employee of an RMP can
serve as a consultant to another RMP or other health-related
agency during his normal work week. Such employee may be
reimbursed for travel and subsistence costs by either
organization, but dual salary compensation for such
consultation is not allowable. ,

An individual employed as a consultant by an RMP is acting
as a private contractor in relation to the RMP and must be
appointed as such. Ordinarily, consultants should be
appointed only when it can be documented that:

.
ALLOWABLE COSTS

1. Services to be provided are essential and cannot be
provided by persons receiving salary support under
the grant or otherwise compensated for their services.

2. A selection process has been employed to. secure the
most qualified person available and that the selection
thas been approved by a senior officer of the grantee

organization.

-3, The charge is appropriate considering the qualifications

of the consultant, his normal charges, and the nature
of the services rendered.

Employees of the grantee or affiliate paid for services
rendered to a Regional Medical Program within their normal
work week are not consultants. The grantee or affiliate
institution may be reimbursed in accordance with time or
effort in connection with RMP for the salary of such
employees. In such cases the individual employee receives
his normal salary from the institution, and additional
compensation is not allowable. Where frequent consultation
from a given individual is required, consideration should
be given to part-time employment of that person.

. Ay
Members of the Regional Advisory Group may be reimbursed
for actual and necessary expenses incurred in connection
with service to the RMP. A RAG member may not serve as a
paid consultant to the same RMP, since all advice and
assistance to that RMP is provided in his capacity as a RAG
member. — Non-professional RAG members, however, who suffer

loss of salary as a result of attending RAG meetings or

other RMP activities, may be reimbursed for such losses.

Contingency Funds or Reserves -- Not allowable.

Contracts -~ Allowable. Contracts may be used by grantee
institutions for awards to affiliates, and by both grantees
and affiliates for purchase of material and general support
services. Care should be taken to insure that Contractors,
grantees and affiliates observe all applicable Federal
requirements.

Dependency Allowances ~- See "Stipends and Training Costs."

13
ALLOWABLE COSTS

Depreciation or Use Charges (if equitably applied to all
Services) -- Not allowable as a direct cost but may be
included in the grantee's indirect cost pool. Deprecia~
tion on that portion of equipment charged to Federal grant
or contract funds is unallowable except where specifically
authorized by a policy waiver and included in program
guidelines. .

Direct Assistance -- Allowable. At the request of any
recipient of a grant for a Regional Medical Program, the
payments to such recipient may be reduced by the fair
market value of any equipment, supplies, or services .
furnished by the Secretary to such recipient and by the
amount of the pay, allowance, traveling expenses, and

any other costs in connection with the detail of an officer
or employee of the Government to the recipient when such
furnishing or such detail, as the case may be, is for the
convenience of and at the request of such recipient and
for the. purpose of carrying out the Regional Medical Program

to which the grant is made.

Dialysis -~ See "Kidney Disease Activities."

Donors -- Payment is allowable to volunteers or research
subjects who contribute blood, urine samples, and other
body fluids or tissues which are specifically project related.

S

Drugs -- Federal funds will not be expended for purchasing
any drug or drug product for which the Food and Drug
Administration has made an initial determination published
in the Federal Register that there is a lack of substantial
evidence of effectiveness for all indications. This policy
applies to all identical, similar, or related products,
whether or not they are specifically mentioned in the
Federal Register notice. .

The following are exceptions to the above policy:

a. -Federal funds may be expended to purchase those drugs
contained on the list filed by the Food and Drug
Administration with the United States District Court
for the District of Columbia and which therefore may
-remain on the market pending completion of scientific
studies to determine effectiveness because there is a
compelling justification of the medical need for the

_ drug.

14

 
 

' ALLOWABLE COSTS

b. Federal funds may be expended to purchase drugs which
lack substantial evidence of efficacy for use in the
pursuit of approved clinical research projects.

List of drugs (1) which lack substantial evidence of efficacy
and (2) which are exempt from this policy for compelling
medical need are available from the office of the Assistant
Secretary for Health, Department of Health, Education, and
Welfare, Washington, p.c. 20201.

‘Dues, Institutional -- Costs of the grantee or affiliate

institution's membership in civic, business, technical, and

_ professional organizations are allowable when necessary to
- accomplish the objectives of RMP.

Dues, Personal -- Costs of personal memberships in civic,

business, technical and professional organizations are
allowable only to the extent that they are (1) limited to

one individual per headquarters or major field installation

of the Regional Medical Program; (2) can be purchased at a
lower price than institutional membership; (3) are required
to obtain publications or for other purposes necessary to
accomplish: the objectives of RMP.

Entertainment -~- Costs of amusements , social activities,
entertainment, or incidental costs related thereto are not

allowable.

‘
Equipment -~ Costs of Rental, purchase, maintenance, taxes,
and delivery of equipment, including diagnostic and treatment
equipment, for the planning or implementation of a program
are allowable. When acquiring major items of equipment, con-
sideration of the relative advantages of lease versus purchase
should be considered. Rental of equipment owned by a grantee
or affiliate is not allowable. but equipment may be charged

to a grant if issued from a central stockroom.

Federal Employee Compensation -- Grant funds may generally not
be used to pay fees and supporting costs to U.S. Government
employees regardless of their employment or pay status, except ~
that grant funds may be used to pay consultant fees to U.S.
Government employees when:

a. These employees are medical personnel of the Uniformed
Services of the United States (excepting commissioned.
officers of the Public Health Service) qualified to
provide the kind, type, and extent of medical services
approved in the grant award.

15
ALLOWABLE COSTS

  

b. Adequate numbers of qualified civilian medical personnel
are not available to provide the kind, type, and extent
of medical services approved in the grant award and
medical personnel of the Uniformed Services of the
United States (except commissioned officers of the Public
Health Service) are hiredonly in addition to those qualified
civilian medical personnel, if any, who are available.

'¢c. The medical personnel of the Uniformed Services of the
-United States (excepting commissioned officers of the
Public Health Service) hired as consultants have prior

written authorization from their commanding officers
to work on the grant supported activity and to be paid

- for their efforts. "

Travel or other supporting costs, but not consultant fees,

for Federal employees may be paid when consultative assistance

is required from a Federal program other than RMPS. (For

example, if an RMP needed consultation from an Office of

Education employee, it could pay his travel and subsistence

in the event that the OE's travel funds. were limited. Payment

to Federal employees are also allowable when the employee is

a patient or subject undergoing study in connection with

research supported by. the grant. In addition, salaries and

travel for Federal employees are allowable when the employee

is: ~. ,

a. working under a grant to a Public Health Service Hospital,
Indian Health Service Hospital, Saint Elizabeth's Hospital,
the Veterans Administration, or the the Bureau of Prisons.

b. either on Leave Without Pay (LWOP) status or on detail
to the States, the U.S. possessions and its territories
and reimbursement is in accordance with terms mutually
acceptable to the employing agency and RMPS

Films, Videotapes, and other Audiovisual Materials -- Allow-
able provided that the films or other audiovisual material

is intended for viewing by restricted audiences. Grant

funds may not be used to produce films, videotapes or other
. audiovisual materials, for viewing by the general public

without prior approval of the Regional Medical Programs
Service. While there is no universal rule for determining
whether the intended audience for audiovisual material should
be regarded as "general" or "restricted" the following situations
are routinely. considered as involving the general public:

16
 

()

ALLOWABLE costs

a. Broadcast on commercial or educational public television

b. Showing in commercial movie houses

c. Showing in public places such as airports, waiting
rooms, bus or railroad depots, vacation resort

facilities, etc.

ad. Showing to civic associations, schools (except
when used as 4 teaching tool in a classroom setting) ,
clubs, fraternal organizations, or similar lay groups.

Particular care must be exercised to assure that films or
other audiovisual materials to be produced with RMPS funds
facilitates the purpose for which the funds were awarded
and that acknowledgement of RMPS support is indicated in
the film, videotape oF recording. Such acknowledgement
must be expressed in the following language:

phe production of this film was supported by

Grant No. from the Regional Medical
programs Service. However, its contents are

solely the responsibility of (name_of grantee
“Lor anization) and are in no way the
‘Fesponsibility of the Regional Medical Programs
Service, the Health Services and Mental Health ’
- Administration or the Department of Health,
Education, and Welfare."

Grantees Or their affiliated institutions may produce and -

distribute audiovisual materials, or contract for production
and distribution of such materials with RMPS funds, provided.
that the materials in question include the. required acknow- |
‘ledgement of RMPS assistance and the disclaimer shown above.

When audiovisual materials or publications are developed
with RMPS support, the grantee is free to arrange for
copyright without prior RMPS approval. Copyrighted materials.
are subject to a royalty-free, nonexclusive and irrevocable
license to the Federal Government to reproduce, translate,
and publish them, and to authorize others to do so.

Audiovisual materials produced for the purposes of the grant
with RMP funds are the property of the grantee institution.
Therefore, any contract, entered into for their production
and/or distribution would have to involve the grantee and

the distributing or producing organization.

17
ALLOWARLE COSTS

Grantees should copyright audiovisual materials produced
through grants, since the copyright would afford grantees
a legal basis for receipt of any income derived from the
distribution of such materials.

Audiovisual materials developed with grant funds may be
disposed of as follows: ,

a. They may be sold by the grantee to a distributing
organization, .

b. They may be retained by the grantee institution, and
distributed as appropriate,

c. They may be turned over to a Federal distribution
center, (i.e., National Audio-visual Center, GSA).

All royalties or other fees received by grantees or their
affiliated institutions from the use or distribution of
audiovisual materials produced with grant funds, up to the
amount. they charged to the grant for production of the

’ audiovisual materials, .must be refunded to RMPS. In this
regard, grantees shall be responsible for maintaining
records for the receipt and disposition of the Federal

share of income received from the distribution of these
audiovisual materials in the same manner as required for :
the funds provided by the grant which gave rise to this
income. Upon notification from a grantee that income has
been generated from the distribution of the audiovisual
materials, grantees will be advised as to the disposition

of such funds. Any income received by a grantee or an
affiliated institution from distribution of these audio-
visual materials that is over and above the amount that is
charged to the grant may be used by the grantee at its
discretion. (See "Grant Related Income" for specific details.)

Consult Chapter 1-450 of the HEW Grants Administration
Manual for detailed requirements coricerning audiovisual
materials. It should be noted that Chapter 1-450 does not
(1) restrict the distribution of these audiovisual materials
once produced in accordance with the policy contained
therein; and (2) is not applicable where audiovisual
materials are produced with other than Federal grant funds.

Foreign Travel -- Allowable only with prior RMPS approval.

18°

 

 
 
ALLOWARLE COSTS

2. The recipient is below the program-defined income
level at which he might be expected to pay for health
services or purchase health insurance; and

3. The recipient is located in an area where there are
applicable prepaid capitation or insurance programs
for which the recipient is eligible and such pro-
vider is a non-profit organization approved by the
awarding component.

B. Equipment -~ costs for insuring equipment purchased with
RMPS funds are unallowable unless the grantee's liability
for the equipment is” specifically provided in the grant
award, or other specific authorization for such charges

has. been approved by RMPS.
Interest Costs -- Not allowable.

Kidney Disease Activities -- Allowable and not allowable costs
of various specific categories of kidney disease activities
are outlined below. . Kidney disease programs are expected to
be fully operational independently from RMPS support after

the third year of grant support.

 

_ a. Dialysis and Transplantation Facilities for Children --
Start-up costs are allowable for pediatric end-stage
renal activities in selected areas of need.

b. ‘Education -- Training and continuing education of
physicians, postgraduate renal nurses, and other allied
health professionals to improve care for patients with
end-stage renal disease is allowable, subject to the
‘requirements and limitations of RMPS policies relating
to educational and training activities. (Also see
"Basic Education," and "Training Costs.")

c. Home Dialysis Training -- Allowable where there is a
demonstrated need. Home dialysis training programs must
be affiliated with a transplantation program and provide
-or have access to acute dialysis backup.

da. Low-overhead Limited-care Dialysis -- Allowable for the
development of home dialysis training programs where
there is a demonstrated need. Such programs must be
affiliated with a primary care program and have access
to acute medical resources.

e. Organ Procurement Activities -- Allowable for start-up
of a Region's organ procurement activities.

20 -

 
 

ALLOWABLE COSTS

f. Organ Procurement and Communication Activities -- Allow-

able. Such activities must provide optimal use of
harvested organs through sharing among many transplant
centers serving several areas. These activities should,
like other kidney disease activities, become self-
sufficient over time as RMPS funding is reduced and
eventually withdrawn. It is, however, more difficult
for these activities to be financed by third-party
carriers, and the costs of managing the organ-procure~
ment network may be added to the individual cost per

organ harvested.

g. Public Education -- Allowable to provide limited support
for. appropriate public education activities which are
clearly related to specific output of the end-stage
renal program.

h. Satellite Dialysis Facilities -- Allowable where >
appropriate to serve the backup needs of patients
who are geographically removed from tertiary care
facilities. —

i. Tissue Typing -- Allowable for start-up costs provided
that the tissue typing labs are not. redundant and
. duplicative.

. . . ‘
j. Transplantation -- Allowable for establishment of trans-
plantation programs in areas of need. Direct patient
care costs are not allowable. :

Awards for end-stage kidney disease activities will be issued
as part of the total award to. the Regional Medical Program.

“fhe amount allocated for the kidney activity will be specified

in Item 14, under "Remarks'of the Notice of Grant Award, Form
HSM-457, or noted in the covering letter accompanying the
award.

In some cases, an end-stage kidney proposal may be approved
by RMPS but unfunded. An RMP may fund such a kidney project
through rebudgeting other RMP funds to the kidney activity,
but only to the level shown in the award. Rebudgeting of
this nature should be undertaken only after the RAG has
carefully considered the effect of such action on the

’ remainder of the RMP program, and approved the rebudgeting

of funds into end-stage kidney activities. The RAG may also
approve rebudgeting among approved end-stage renal activities

within the total amount specified for kidney in the award

documents. The total amount available for end-stage kidney
activities may not be increased or decreased through rebudgeting

21
ALLOWABLE COSTS

_ without prior approval by both the RAG and RMPS. The total

-amount available is the amount specified for kidney in the
award documents plus any additional RMPS funds rebudgeted
to end-stage kidney activities.

No RMPS funds, including grant related income, may be used
to support any end-stage kidney disease activity unless

the activity has been recommended by the National Advisory
Council and approved by RMPS. Grant related income may not
be spent for any purpose without prior RAG and RMPS approval.

Where RMPS approves the rebudgeting of funds into end-stage
kidney activities, it should not be anticipated that RMPS
will provide additional funds in the future to support the
increased level of expenditure that has been created by the
rebudgeting. Funds rebudgeted into end-stage kidney acti-
vities must be spent for such activities, and in no case may
wnexpended balances accruing in end-stage kidney activities
be rebudgeted to non-kidney activities without prior RAG and
RMPS approval.

Where funds are rebudgeted into or out of end-stage renal
activities RMPS should be notified.

Leave -- Allowable for employees when earned on the project
which the grant is supporting and prorated in accordance with
the salary charged to the grant. Leave is not allowable for
‘trainees and fellows. Trainees and fellows in academic
institutions are not entitled to vacations as such. They are,
however, entitled to the normal short student holidays observed
by their training institutions. Trainees and fellows in non-
academic institutions are entitled to the holiday and vacation
schedule applicable to all trainees at the institution.

Additional payment for leave not taken may not be claimed,
but terminal leave is allowable.

Legal Fees -- Allowable when separately incurred specifically
for a grant related purpose, such as establishment of a new
corporation to administer the RMP or the development of new
nonprofit educational consortia. When the grantee or affili-
ate is reimbursed indirect type costs by means of an indirect
cost rate legal fees incurred by the grantee or affiliate on

a “retainer basis” may be reimbursed only through the indirect
cost allowance, and may not be charged directly to the grant.

22

 
 
ALLOWABLE COSTS

No experimentation with human subjects shall be carried

_ out without specific prior approval by RMPS. In addition,
activities of this nature shall be conducted only in
accordance with a plan for the protection of human subjects
approved by the National Institutes of Health.

_ Printing Costs -~- Allowable except that any grant activity
‘which, would require printing in excess of 5,000 units of
one page or 25,000 units in the aggregate of multiple

pages must be considered as printing substantially for the
Government and must be done through regular Government
channels. (See Grants Administration-Manual Chapter 1-463.)

Publications -- Costs of publication of work in scientific
. and technical. journals may be paid from grant funds if all
.of the following conditions are met:

1) the papers ‘report work supported by the grant,

2) the merit.of the paper is. used by the journal as the
first criterion in acceptance for inclusion in the journal,

3) ‘any. charges for publication ‘by the journal are equitably
, applied to all papers regardless of the source of financial
support

4

4) .the journal involved is not operated for profit, and

5) the copyright is owned and ‘managed by a nonprofit
institution.

Such costs may include amounts for special plates, charts,
- and diagrams; part of the cost of all papers published where
required by the scientific journal; a reprints of: the
published material.

Costs of publishing books, monographs, and pamphlets reporting
the work supported by a grant are allowable.

Particular care must be exercised to assure that books or
publications to be produced with RMPS funds facilitate the
purpose for which the funds were awarded and that acknow-
ledgement of RMPS support is indicated in the publication.
. Such. acknowledgement must be expressed in the following
language:

24

 

cp
   
 

ALLOWABLE COSTS

"nevelopment of this publication was supported by
Grant No. from the Regional Medical
Programs Service. However, its contents are solely
the responsibility of . (Name of grantee organization)
and are in no way the responsibility of the Regional
Medical Programs Service, the Health Services and
Mental Health Administration, or the Department of
Health, Education, and Welfare.” .

Grantees Or their affiliated institutions may produce and
distribute publications, or contract for the development

and distribution of such materials with RMps funds, provided
that the publication in question includes the required

_ acknowledgement and the disclaimer shown above.

When publications are developed with RMPS support, the
grantee is free to arrange for copyright without prior
RMPS approval. copyrighted materials are subject to a
royalty-free. nonexclusive and irrevocable license to the
Federal Government to reproduce, translate, and publish
them, and to authorize others to do so. (Also see Grant

Related Income.)

Purchased Services -~ €osts associated with services pur-
chased from third parties are allowable.

Recruitment Costs -- (for recruiting staff for RMP activities)
Allowable only for full-time employment on RMPS supported ,
activities, if payment of such costs js normally made by the
grantee, OF affiliate, regardless of source of funds. Costs
may include. moving the individual, his family, dependents,
household goods, and personal pelongings.- costs of relocating
an employee must. be credited to the grant account when the
employee resigns within 12 months after employment for

reasons within his control. Not allowable for individuals
recruited for part-time or cemporary employment on an RMP
program staff or operational activity.

Recruitment, Health Careers (as 4 program staff or operational
activity) = Not allowable for direct recruitment of individuals
into health careers. RMP program staff activities related to
stimulating, planning and coordinating health careers recruit-
ment by appropriate institutions and agencies in the area
served by the RMP, however, is allowable. RMPS are encouraged
to use staff assistance to stimulate cooperative efforts
between professional associations, clinical resources, educa~
tional institutions and other appropriate agencies to provide
new opportunities for recruitment into health careers and to
plan health careers recruitment activities as part of and
coordinated with the overall manpower strategy for the area

served.
25
ALLOWABLE COSTS

Registration Fees -- Allowable if it can be shown that
they are necessary to accomplish program objectives.

- Rental of Equipment -~ See "Equipment."

Rental of Space -- Allowable when charges are made in con-

. formance with normal grantee policies regardless of the source
of funds. No rental charge may be made for space owned or
‘controlled (managed or administered) by the grantee or by an
affiliate; except that a charge may be allowed equivalent

to the cost of ownership, e.g., depreciation or use allowance
taxes and normal maintenance and operating costs unless
included in indirect cost. Also, when an organization trans-_
fers a facility to a third party through sale, lease, or
otherwise, and then leases the facility back from that third
‘party, the lease costs which may be charged to the grant may
not exceed the equivalent of the "cost of ownership."

 

Rental costs under unexpired leases, i.e., leases for space,
equipment, and/or maintenance contracts, ets., are generally
‘allowable if (a) the amount of such rental claims does not
exceed the reasonable use value of the property leased for
-the period of the activity, and (b) the grantee and affiliates
make all reasonable efforts to terminate, assign, settle or ©
otherwise reduce the cost of such lease.
Sabbatical Leave -- Sabbatical leave salary, as such, is not
allowable, but sabbatical leave costs to the institution may
be included in a composite fringe benefit rate. Salary from
a grant for services rendered the project by an individual
during his sabbatical period is allowable provided that the
salary is proportional to the service rendered. RMPS funds
‘may not be used to pay a total salary during the sabbatical
leave period which exceeds the individual’ s regular full-
time salary from the institution.

Salaries and Wages ~- Allowable for time spent on a grant-
supported activity. No supplementation of base salary is

permitted. Salary and wage rates must be in conformity

with those permitted by institutional wage and salary

scales and policies. RMP program staff salaries should

be reasonable and not exceed the salaries of full-time
personnel with equivalent responsibilities in major medical
institutions in the Region. . Direct charges for professionals
must be supported by either:

26
 
ALLOWABLE COSTS

No overtime pay for professional personnel may be charged
to grant funds. When all of the salary of nonprofessional
personnel is charged to projects. supported by grants and
contracts, overtime may be charged to RMPS grants on which
the overtime was worked. When the salary is charged partly
to grant or contract funds and partly to institution funds,
the total of the salary (both the regular rate amount and
the premium rate amount) must be prorated in accordance with
_ the time spent on the RMP project. Where the institution
has a policy of charging premium overtime to the indirect
cost pool, no premium overtime can be charged directly to
an RMP grant.

 

Where personnel costs apply to two or more grants, the costs
will be prorated to each grant involved.

Satellite Dialysis Facilities -- See "Kidney Disease Activities."

Service Charges -~- Allowable for use of certain types of
services and central facilities owned by the grantee insti-
tution, e.g., computer services, motor pool, animal facilities,
etc., providing the charge is designed to cover only the
actual costs and is-applied equally to all users and not
included in the indirect cost pool. — 0
: : \
Severance Pay -- Allowable. Severance pay is an allowable
cost only when it is required by (a) law, (b) employer-
employee agreement, (c) established policy that constitutes,
in effect, an implied agreement on the institution's part, or
(d) circumstances of the. particular employment. Regional
Medical Programs Service will not consider severance pay an
allowable cost unless the basis for payment for any of the
four options listed above is a formal written policy or
agreement of the grantee institution, which existed prior
to the February 1, 1973, notice of phase-out. ,

Stipends and Training Costs -- Allowable. Grant funds may
‘be used for the payment of stipends and other benefits
related to RMP training activities. Stipends may not be

‘ paid for short-term training of more than'a single academic
session or training conferences and seminars. Maximum
allowances for long term training are set forth below:

Post-doctoral -

1. $6,000 “(no relevant post-doctoral experience)

28
ALLOWABLE COSTS

 

ae $6,500 - (one year relevant post-doctoral experience)

3. $7,000 (two or more years relevant post-doctoral experience)
pre-doctoral - |
1. $2,400 (first post-baccalaureate year)

2. $2,600 (years between first and terminal year)

3. $2,800 (terminal year)

pre~doctoral - Experienced Student Support --

*Months of Related professional

Work Experience Yearly Stipend Amount

‘Less. than 12 months | a | $3,000

12-23 months : . Do $3,300

24-35 months © 7 $3,600

)) 36-47 months : oe $3,900
48 or more months $4,200 . ‘

* Each single full-time academic year of graduate experience

as defined by the institution, beyond the baccalaureate level,
shall equal 12 months of related professional work experience

for stipend level purposes.

Dependency allowances for those long-term trainees, who are
-4n training for a full academic year, may be awarded an.
amount not to exceed $600 per annum for each dependent who
would meet the criteria developed by the Internal Revenue
Service for dependency. (Consult IRS for details.)

Reimbursement for per diem and travel for trainees should be
made in accordance with the travel policies of the grantee
institution, or in the absence thereof, in accordance with
currently effective DHEW travel regulations.

29
 

ALLOWABLE Costs

Subgranting --~ Not allowable, However, allocation of RMPS
funds by grantees to affiliates ang other institutions to
Support RMp activities igs necessary to establish the regional
‘Cooperative arrangements among health, medical, and related
institutions required by Title IX of the Public Health
Service Act, as amended. -Such allocations, therefore, do not

constitute subgrants,

Subject Costs -. (See "Patient Care.").

Supplies ~- Allowable for supplies directly required for
RMP activities, ,

Taxes -~ Allowable, Taxes which an institution is required to
Pay as they relate to employment, Services, travel, renting,

OF purchasing for @ project are allowable, Property taxes on
land, building, equipment, or Supplies in other than construction
Programs are not allowable, Institutions should avail themselves
of any tax-free status exemptions for which activities supported
by Federal funds may qualify. on construction Projects, State
sales and use taxes for materials and equipment are allowable
Only when no refund or exemption on. such taxes is granted by

the States to the grantee, . .

are being provided are allowable, This cost may include Public
- transportation and purchase of motor vehicles provided the
Purchase is treated @S an item of equipment and Prior approval
of the awarding component is obtained,

Prior RMPS approval is required for each foreign trip and

attendant trave] expenditure, Domestic travel is performed
within the grantee's own country and travel between the

30.
  
 

Iii.

ALLOWABLE COSTS

United States and Canada for grants made to institutions
within the U.S. OF Canada. The U.S. includes Guam, American
Samoa, Puerto Rico, the Virgin Islands, Canal Zone, and the
Trust Territory of the Pacific Islands. Travel within the

‘U.S. or Canada enroute to or returning from 4 foreign desti-

nation is considered foreign travel. Other travel performed
to, between or within a country other than the grantee's own
country is defined as foreign travel.

Travel costs are limited to the extent provided by formal
institutional travel policy except that, less than first-
class air travel on United States carriers must be used
when available. If the grantee institution has no formal
travel policy, HEW travel regulations shall be applied in
determining the amount for travel chargeable to grant funds.

“guition and Related Costs 7" Tuition and related costs of

employees are allowable when the training is required to
gain specific skills or information needed for the success~
ful prosecution of the objectives of the project funded by

the grant to which the tuition will be charged. The

instruction is not to. be given primarily to fulfill the
requirements for an academic degree for the employee for

whom the tuition support is to be paid. Other tuition costs
(tuition and remission) are not allowable unless treated

consistently as a fringe benefit. \

“INDIRECT COSTS

within the limits of allowable costs and the total award, the

grant may be charge

a for indirect costs incurred in connection

therewith.

1.

2.

Provision of Services

Any institution reimbursed tor indirect costs under a grant must
actually provide for the grant those services used to justify

the indirect cost rate.

Duplicate Charges

Services used to justify an indirect cost rate may not be charged
again as direct costs to a grant. (If they were, this would mean
either, (1) that the Government was paying for duplicate services,
(2) that the institution receiving reimbursement for indirect costs
was not providing the services for which payments were made, or
(3) that the requested indirect cost rate was insufficient and
required admustment.)

31
‘Funds awarded
any direct cos

 

ALLOWABLE Costs

for indirect

. Costs may not be transferreg to
t category, ,

32
  
 

A.

Examples of Usual Types_of Indirect Costs

APPLICABLE TO RMP ONLY

INDIRECT COSTS

I NATURE OF INDIRECT COSTS

pefinition and Elaborations

Indirect costs are those costs of an institution which are

not readily identifiable with a particular project or activity,
but neverthless are necessary to the general operation of the
institution and the conduct of the activities it performs.
Indirect costs are not peculiar to government sponsored activi-
ties, as they are generated to some extent by all business
ventures. Indirect costs are normally calculated as a per~
centage of either (a) direct salaries and wages, OF (b) total
direct costs exclusive of capital expenditures. _ Indirect. costs
are earned by the institution and may be used for general
institutional purposes without further accounting to the
Federal Government.

The following type expenses of an institution are normally
considered as indirect costs, and are reimbursed to an institu-
tion by weans of an indfrect cost rate:

1. The cost of operating and maintaining buildings and equip-
ment--which usually includes: heating, air conditioning, |
lighting, service cleaning and maintenance contracts, and

minor repairs.

2. Depreciation--which usually includes writing off the cost
of buildings and equipment over their estimated useful life.

3. Salaries of administrative officials concerned with general
management of the institution--usually include the person-
nel employed in central executive offices, the purchasing
office, the public relations office, and the accounting
and finance departments.

4. General telephone expenses ~-which usually include the
monthly rental and usage charge for all telephone and
‘long distance calls by the administrative staff.

5. General travel, supplies, and other expenses--which usually
include all travel by the central administrative staff (not
program staff), all supplies necessary for the operation
and maintenance of the building,as well as the offices and
facilities within the building,and the insurance, payroll
taxes, other taxes, and any other fringe benefits, generated
by the administrative payrolls.

33

 
Cc.

INDIRECT COSTS

Incurrence of Indirect Cost

Where any of the above types of costs or other central service
costs are used by a grantee or affiliated institution to justi-
fy an indirect cost rate in connection with RMP supported
activities, the servtces for which the costs are incurred must
actuelly be provided to the grant supported activity. (e.g.,

if all equipment and supplies for an activity are purchased

by the RMP program staff, an affiliated institution sponsoring
the activity could not include the costs of its central pur-
chasing department as part of the justification for its indirect |

cost rate.)

Iz FACTORS AFFECTING DETERMINATION OF RMP INDIRECT COST RATES

A.

Guides for Institutions

Indirect cost rate is eimply a device for determining fairly
and expeditiously what proportion of an institution's over-
head expenses should be charged to grant-supported projects

or activities. The Department has issued separate guides for
educational institutions, hospitals, State government agencies,
and nonprofit institutions which set forth uniform principles
for the establishment of indirect cost rates.

The cost principles set forth in the guide covering -

the specific type of institution receiving RMPS funds will be
used as the basis for computing a submission for a proposed

indirect cost rate.
Special Indirect Cost Rates for RMPs

Because of the complex organizational structure of RMPs, a single
ICR applicable to all RMP-supported activities will ordinarily
not be able to be developed. In some RMPs, program staff is
employed by more than one institution and operational activities
are carried on by various institutions which change over time

as old activities are phased ov~ and replaced by new activities
under different sponsorship. For these reasons, RMP indirect
cost rates, when requested, will have to be determined separately
for the grantee institution and for each affiliate which receives
RMPS funds either for support of program staff or operational

activities.

While many RMP grantees and affiliates have approved indirect

cost rates applicable to biomedical research projects, different
indirect cowt rates specifically applicable to RMPS-supported
functions may have to be developed. In the case of RMP, many

types of expenses ordinarily treated as general administration costs
by the grantee tor other types of grants are charged as direct

costs to RMP. For example, many RMPs provide for their own
purchasing, personnel administration, financial management and

34
INDIRECT costs

bookeeping, whereas the usual research grant would rely on
the central administrative mechanisms of the grantee insti-
tution for guch services. ,

For the above reasons, then, it will usually be necessary to
determine an appropriate RMP indirect cost rate for the grantee
and each affiliated institution. In addition, the indirect

cost rate determined for & given institution for RMP will usually
be different from the indirect cost rate approved for other types
of grants. The methods for negotiation and approval of indirect
cost rates for: (a) RMP grantees; and (b) affiliated institu-
tions receiving RMP support is discussed in the following sections.

 

rir NEGOTIATION OF INDIRECT COST RATES FOR GRANTEE INSTITUTIONS

A. Method of Negotiation

The Office of Grants Administration Policy, (OGAP), in the
Department of Health, Education, and Welfare, has the responsi-
bility for negotiating indirect cost rates with each grantee
instttution requesting jndirect costs.

Each grantee which wishes to be reimbursed for indirect cost

- must submit an annual indirect cost rate proposal within six
9 months after the last day of each of the fiscal years for which
SN . . . :

Each institution's indirect cost rate proposal should propose
as many indirect cost rates as are deemed necessary for the
equitable allocation of indirect costs to its awards. For
example, if the grantee conducts RMP activities at several
different locations, it may propose separate rates for each,

where appropobate (i.e-5 on-campus rates, off-campus rates, etc.).
Indirect cost rate proposals should be submitted to:

Division of Cost yolicy and Negotiation
office of Grants Administration Policy
Department of Health, Education, and Welfare
330 Independence Avenue, S.W.

Washington, D.C. 20201

Once an indirect cost rate has been negotiated by OGAP,

it will be incorporated into an official negotiation agreement
setting forth the results of the negotiation, indicating
therein the applicable rate for RMPS grants.

B. provisional and Final Rates

The indirect cost rate negotiated by OGAP may be either 4
provisional or a final rate. ;

35
INDIRECT costs

 

Iv. NEGOTIATING INDIRECT COST RATES FOR AFFILIATES

A. Gfantee Responsibilities

1. Required Grantee Action

a. The affiliate has no established indirect Cost rate anu
none is currently being negotiated with OGAP for any
other HEw program, :

b. An indirect cost rate hag been Negotiated for Specific
Programs of the affiliate Other than RMP and ig not
pplicable across the board to all HEw Support

The grantee is also responsible for verifying the appropri -

4. There is an established rate for the affiliated institution
which is applicable to all
by the grantee to be “ppropriate for RMPS Supported activities, VU

36
 

INDIRECT costs

b. OGAP is. in the process of negotiating the affiliate's
indirect cost rate for other HEW programs (in which
case’ OGAP will simultaneously establish a rate for

RMPS support).

c. The grantee decides at its discretion to reimburse
all of an affiliate's costs as direct charges to the

grant.
3. Staffing for Indirect Cost Studies by the Grantee

A grantee's negotiation or verification of indirect cost
rates for affiliates can be carried out by either the
grantee's own financial staff or through the employment

of qualified accountants or accounting firms as consultants.
In addition, OGAP may be called upon for advice as necessary.

Provisional and Final Rates for Affiliates

Where the grantee institution negotiates indirect costs
directly with an affiliated institution,it will be the grantee's
responsibility to negotiate both provisional and final indirect
cost rates with each affiliate institution. Once a final rate
is agreed upon between the grantee and an. affiliate, it will

not be subject to further review or change, and will be con-
sidered to be the final rate as if negotiated by OGAP.

Before finalizing an indirect cost rate, the following steps
must be taken by the grantee to support the reasonableness of °
the finally established indirect cost rate:

1. Review the adequacy of the affiliate's procedures, the
reliability of the records, and the effectiveness of their

internal controls.

2. Review the completeness of the base used for distributing
the overhead costs, including an evaluation of the reasonable-
ness and applicability of the base utilized (i.e., direct
labor hours, direct labor dollars, etc.) to the sub ject

and purpose of the project to which applied.

3. Review the pool of indirect expenses for those expenses. which
may be fully or partially unallowable, based upon their nature

or content. »

4. Selectively analyze the remaining accounts in the overhead
pool for applicability to the RMP activity. Eliminate from
the pool any expenses where similar type expenditures were
previously recovered as a direct charge. Do not automati-
cally eliminate overhead accounts from the pool purely by
expense nomenclature if items of the same expense. category
are recovered as direct charges. Before elimination of

37
6.

10.

_ Should obtain or prepare a schedule of indirect expense

rate is warranted for the RMP activity.

utilized for depreciation, and whether the depreciation

INDIRECT COSTS

any accounts from the overhead pool, a review should be
made of the expenses comprising the account to ascertain
if these expenses are really similar to those included as
direct charges. The basis for determining the specific
areas to be selected for intensive review and testing,

and the depth and scope of the review should be determined
by a review of a listing of the account balances of the
various indirect costs, comparison with prior periods, and
with the current year's operating budget. The reviewer

accounts for the period under review and select for thorough
analysis those accounts which are significant in amount,
vary from developed trends, or which,on the basis of
nomenclature review, appear to be sensitive in nature and
likely to contain questionable costs. ;

Reconcile the affiliated institution's overhead submission

to their general books of account. Ascertain in relation
to the nature of the project whether a special overhead

Where applicable review the reasonableness of the rates

 

was based upon acquisition value or appraised value of

the institution's assets. Ascertain if large repair and
maintenance expenses have been incurred which may be justi-
fiably reclassified to a capitalization account rather than
annually expended. \

 

Determine whether fringe benefits are included in both the
overhead pool and base, and evaluate the reasonableness of _
this procedure.

Ascertain whether any income accounts from the "Income

-Statement" shoulc be an offset to any of the expense
accounts in the overhead submission.

When RMP project ectivitées are performed at off-site

_locations, determine whether a separate overiead expense is warrant:
“at this off-site location. If such a study is available,

evaluate the reasonableness of allocations contained therein.
If not, evaluate the reasonableness of the application of
the main facility's overhead rate to off-site activities.

After eliminating unallowable items, the remaining total
expenditures should be segregated between: (a) expenditures
applicable to overhead functions, and (b) expenditures for

all other purposes (direct). Expenditures applicable to an
institution's vverhead function normally include Administration

“and General Expenses, Housekeeping, Laundry and Linen, Main-

tenance of Plant, and Provision for Depreciation. # y

38
INDIRECT COSTS

11. To obtain an indirect cost rate, the total amount of
direct costs is divided by the total amount of indirect
costs (after the exclusion of unallowable items). The

resulting percentage is the indirect cost rate.

 

12. The resulting rate should be applied to the direct costs
of the project to arrive at the allowable amount of indirect

costs.

Full documentation of the above steps should be retained by the
grantee institution as evidence that required procedures have

been carried out.

PROCEDURE FOR EFFECTING SEETLEMENT OF DIFFERENCES BETWEEN
ISIONAL AND FINAL INDIRECT COST RATES

PROV

 

A. Summary Report of Expenditure Adjustment Sheet

Chapter 1-80, of the DHEW Grants Administration Manual entitled,
“avard and Payment of Indirect Costs on Project Grants," relates
to the award and payment of indirect costs on. grants and the
method for effecting settlement of claims for unrecovered indirect
_ costs resulting from the establishment of final negotiated rates.
Chapter 1-80 specifies that “A Summary Report of Expenditure
Adjustment Sheet (SROEAS) shall be submitted py each grantee
to the Office of Financial Management (NIH) reflecting the nec-
essary adjustment (upward or downward) in the indirect costs
to be made on each grant by operating agency and appropriation."
The format for a SROEAS {s illustrated in Chapter 1-80. ‘

 

Wherever the Grantee for a Regional Medical Program submits

a Report of Expenditures, using provisional indirect cost

rates, for either their own or an affiliated organization, and

a final rate is subsequent ly established by the Office of Grants
Administration Policy, for either their own or an affiliated
organization, RMPS will expect the grantee to initiate a SROEAS
to process any adjustments resuiting from the difference between
provisions! and final indirect cost rates.

As indicated in 3-4, above, grantees are responsible for negotiat-
ing finel 4s well as provisional indirect cost rates for affiliated
institutions, that do not have an OGAP established indirect cost
rate. When establishing final indirect cost rates for affiliates,
RMPS grantees shall report the difference between the final and
provisional indirect cost rates in accordance with procedures
specified in 3-5, below. a SROEAS must be submitted to reflect
final rates that are lower than the provisional rate, as well

as those that are higher.

When a final rate is established that is different from the provis-
\ ional rate, it is not -necessary to revise any previously submitted

39
INDIRECT Costs

expenditure reports which include an amount for indirect
costs based on the provisional rate. Al] adjustments

in the amount of indirect cost paid will be made on the
basis of the SROEAS,

Since the Office of Grants Administration Policy reminds the
grantee, or affiliated institutions as appropriate, with its
covering letter transmitting the executed indirect cost negoti-
ation agreement, upward adjustments for increased indirect
costs will not be considered if a SROEAS is not submitted
within this time limitation. RMPS shall consider that the date
of this one year grace period shall start with the effective
date of the earliest negotiation agreement processed by the
Office of Grants Administration Policy, which establishes a
final indirect cost rate for the applicable budget period, for
an institution participating in the granc.

Special Requirements for RMPs

These are:

(1) The SROEAS must reflect indirect cost adjustements to the
RMP grant, separately from those indirect cost adjust -
ments applicable to all other grants of the grantee
institution. .

(2) The initial SROEAS submitted for a particular budget
period should reflect a8 many adjustments as are nec-
essary, and can be processed within the one year grace period,

 

(3) When appropriate, addenda ‘su a SROEAS should be processed
for those institutions whose indirect cost rates were not
finalized at the time of submission of the initial SROEAS |

for a particular budget period. .

(4) The grantee should indicate on the initial SROEAS submitted,
how many of their affiliates were reimbursed indirect costs,
based on either an indirect cost rate established by their
own organization or the Office of Grants Administration
Policy. This will serve to inform RMPS (a) as to which

grantee.
 

INDIRECT COSTS

(5) When the grantee submits. the final SROEAS for a particular
budget period, such Report should be annotated as the
‘final report." The final report should also indicate the
balance of indirect costs claimed on the Report of Ex~-
penditures submitted for which no adjustment will be requested.

Processing of Indirect Cost Adiustments

When appropriate, each grantee shall submit a SROEAS to the Office
of Financial Management (NIH) reflecting the necessary adjust-
ments in indirect costs to be made by RMPS for each project or
activity. Upon receipt of the SROEAS by the Office of Financial
Management (NIH), & COpy will be forwarded to the Grants Manage-
ment Branch (RMPS), via the Office of Grants Management, HSMHA.
The RMPS Grants Management Branch Staff will review the informa-
tion submitted to determine whether or not the adjustments, 26
reflected, are correct. RMPS will then forward a transmittal memo
to the Office of Financial Management, NIH, via the Office of
Crants Management, HSMHA, along with the SROEAS, reflecting any

changes that may be necessary.

Upon receipt of notification of approval, or exceptions, to the
SROEAS submitted by the Office of Grants Management , HSMHA, the
NIH will institute 4 payment or collection of funds. A single
Treasury check or Bill of Collection will be forwarded to the
grantee reflecting the net total dollars of indirect cost ad just -

ments submitted and approved.

41
I. COMPONENTS OF GRANT RELATED INCOME

A.

APPLICABLE TO RMP ONLY

Definition and Elaboration

Grant related income is the Federal ‘share of the net income
derived by a grantee or affiliate from fees or charges made
in connection with activities supported in whole, or in part,
by an RMPS grant, or, where applicable, derived from the
sale of items developed with RMps grant support (e.g.,

GRANT .RELATED INCOME

 

publications, films, medical or other devices),

Net income is income derived from an RMPS Supported activity
less any direct or administrative cost relating to the gener~
ation of. such income,

1.

. Treatment of Commonly Occuring Items of Income

Income from Construction

the income derived from the operation of the completed
facility does not constitute grant-related income except
where the income is generated through specific RMPS sup-
ported activities carried on in the facility.

Where RMPS funds are awarded for construction of a facility, Q)

Income from Government Agencies

Income received from other RMPs or from Federal or other
governmental agencies on jointly-supported projects is not
grant related income. Income derived from fees, or charges,
or sales to such agencies, however, would constitute grant-

related income.

Credits

Credits or receipts (e.q., refunds, rebates, discounts,
adjustments, and other allowances) which offset or reduce
an expense chargeable to a grant do not constitute grant-
related income,

Income from Educational Programs

Normally, tuition and related fees received by an educational
institution for a regularly offered course are not considered
to be grant related income, Tuition and related fees, however,

42
GRANT RELATED INCOME

received by an educational institution must be treated
as grant-related income when the course of instruction
developed, sponsored, and supported by an RMP is not a
regularly offered course. A regularly offered course
is a course that:

ae is regularly offered during school semester.

b. is required or can count toward a degree.

c. requires a formal set of prerequisite courses prior
to enrollment.

ad. is open to all students meeting the necessary pre~
requisites, subject to space availability.

 

5, Other Common Examples of Grant=Related Income

Examples of grant-related income that may result from
RMPS supported activities are:

a. sale of services such as laboratory tests or computer
time.

b. payments received from patients or third parties for
medical or hospital services.

c. fees received for personal services performed in

connection with and during the period of grant support.
co ad. lease or rental of films or videotapes and
Q i e. rights or royalty payments resulting from patents and

copyrights developed or acquired by the RMP in con~
nection with RMPS grants. \

6. Gifts and Donations

Grant related income does not include contributions, gifts,
donations OF other grants given to an organization to further
an RMPS supported activity. A contribution, gift or donation
is distinguished from grant related income if the donor or
the grantor neither expects, nor receives any goods or service
in return for his financsal support.

7. Investment Income

Interest or other income to a grantee or affiliate derived

from investment of RMPS grant funds is not treated as qrant-

related income. All such investment income must be repaid
the Federal Government and may not be waived to or

to
retained by a grantee or affiliate.

II. USE_OF GRANT-RELATED INCOME

Except for royalties from copyrights and patents, special treatment
of which is discussed below, all grant-related income shall be

YS 43
Itt.

treated in accordance with one or a combination of the following

‘Grantees are required to submit written requests for the disposition

GRANT RELATED INCOME

options:

1. used by the grantee for any purposes which further the
objectives of legislation under which the grant was made;

2.° deducted from the total project costs.

RMPS may, and ordinarily will, authorize the use of grant-related
income to further the purposes of the RMP.-

   

of net grant-related income. Such requests should indicate, in
gufficient detail, the expected sources and amounts of such revenues
and plans for their use.

Where grant-related income is expected to be generated during a
budget period, a prospective plan for the disposition of such income
in connection with RMP must be submitted as early as possible, hased
on estimates of sources and amounts of funds. Grant-related income
must be spent within the budget period in which it is earned.

After evaluating such plans, RMPS will advise the grantee of the
amounts and authorized uses of grant-related income waived to the
grantee, and/or the amount to be refunded to the Federal Government,
if any. -

Grant-related income can be used (where permission is requested and
granted by RMPs) for purposes such as the following: (1) to assist
in phasing-in community support for activities initiated by an

RMP, (2) to expand successful operational or program staff activities,
(3) to initiate additional activities within the scope of the program,
and (4) to continue kidney dialysis and transplant activities. > Grant-
related income may be used only for allowable costs.

CALCULATING THE AMOUNT OF GRANT-RELATED INCOME THAT MUST BE REPORTED
TO THE FEDERAL GOVERNMENT.

The amount of grant-related income to be reported to the Federal
Government is determined by (1) the pMp's share of the direct costs
of the project; (2) the production costs of the material which
generated the income; and (3) the amount of revenue generated hy the
material. Grantees and affiliates are accountable for and must
report such income, whether earned during or after the period of
active RMPS support. :

The RMP's share of the direct costs is the ratio of RMP direct costs
to the total project cost. If the entire direct cost of a project

is provided by an RMP, the RMP's share is 1.0. If half the direct
costs are provided by the RMP and half by other funding sources, YW
the RMP's share would be 0.5, etc. vy

44

 
 

GRANT RELATED INCOME

Production costs are the direct costs of producing the income
generating materials--including the time, effort, material and
other costs directly attributable to their development, manu-
facture and distribution.

The amount of grant-related income that must be reported to
the Federal Government is calculated as follows:

1. Where the income exceeds production costs, the RMP's
share of the production costs must be reported.

RMP Direct Costs x Production Costs
Total Direct Costs

Accountable Amount =

2. Where the income is equal to or less than production costs,
the accountable amount is the RMP's share of the income.

Accountable Amount = RMP Direct Costs X Income
Total Direct Costs

Grantees and affiliates do not have to account to the Federal
Government for any grant-related income which is in excess of
the amounts determined aobve.-

SPECIAL RULES FOR CALCULATING INCOME FROM PATENTS AND COPYRIGHTS

RMPS grantees and affiliates from time to time derive income from
patented or copyrighted materials--usually films, videotapes, Or
publications. Special policies apply to the disposition of such
grant-related income.

Any royalties or other proceeds from patented or copyrighted material
developed in whole or in part with RMPS funds must be credited to

the grant account or returned to the Federal Government UP to the
accountable amount. (See Section III, above.)

REPORTS, RECORDS AND ACCOUNTABILITY

The grantee is expected to maintain or require affiliates to
maintain adequate records to support the computation of net RMP
grant-related income. .

The grantee is accountable to.RMPS for grant~related income earned
by the RMP or affiliates.

 

45
II.

APPLICABLE .TO RMP ONLY

EQUIPMENT ACCOUNTABILITY

GENERAL PROVISIONS
nee

Title to equipment acquired either partially or fully with RMps
funds is normally vested in the grantee institution, irrespective
of whether the equipment is acquired by the grantee or one of its
affiliated organizations. Thus, although an affiliated institu-~
tion purchases equipment with grant funds for a specific RMP

‘activity, title to, and accountability for equipment is normally

vested with the grantee institution for the life of the equipment,

Grantees, however, may request RMPS to grant permission for a
waiver of title to or accountability for equipment, or both,
purchased with Title Ix grant funds from. the grantee to either
an affiliated institution or an institution not affiliated with
the RMP, as long as their is an assurance that the equipment
will be used in support of an activity specifically approved
by the RMPS or an activity that would be supportable under
Title IX of the PHS Act. ,

MANAGEMENT REQUIREMENTS

Grantees and their affiliates are expected to apply to equipment
acquired with RMPS funds the same policies, procedures, and
controls normally applied to all of their other equipment,
provided that the following requirements are met.

Grantees and affiliates are required to be prudent in the
acquisition and management of equipment acquired with grant funds.
Careful screening should take place to assure that equipment is
needed and that the need cannot be met with equipment already in
the possession of the institution. A grantee or an affiliate may
be reimbursed for an item of eavipment already owned by the
respective institution only when such equipment is in an
institution's central purchasing department and held in a central
stock room for issuance and sale to a using activity,

For purposes of charging the grant, the cost of a single item or
piece of equipment includes necessary accessories, duty, excise and
Sales taxes. If the institution policy provides that charges for
transportation, protective in-transit insurance, and installation

_ are a part of the cost of equipment, such charges may be included

as direct costs of equipment.

When equipment is sold by a grantee or an affiliate, the net
proceeds of sale must be credited to the qrant account,

46
 

ep

It.

EQUIPMENT ACCOUNTARILITY

ch accountability has not peen waived mayer subject
be disposed of by the grantee after termination

riod provided the grant account is credited with

equipment. The accounting obligation shall apply to that portion
of new equipment that has been purchased by using accountable
equipment as a credit or trade-in. (this is not applicable

to equipment which has a residual value of less shan $100.)

WALVER oF. TITLE AND ACCOUNTABILITY

-once support of an activity is terminatede it is expected chat
the affiliated institution will continue to support the activity-

However r when support of the activity is aiscontinued, che jnsti-

1. The pMpS Grants Management Branch will entertain requests
from grantees to ‘transfer either title to OF accountability
for equipment, or both, to another gnstitution upon termination

of project support.

2. Upon yeceipt of such requests, RMPS will advise grantees
as to whether their aisposition of the equipment is approv™
ed, or if the BMPS has other plans for the equipment for
which disposition instructions will be forwarded to grantees.

3, Grantees will be responsible for documenting their records +
and advising the Grants Management Branch of the pasis for
the proposed action. This documentation should jnelude as
a minimum an itemization c, the specific equipment to pe

4. Grantees will also be responsible for advising che recipients
of the proposed equipment that any transfer to such equipment |
is made conditionally upon compliance by the recipients with the
obligation to use the equipment for the purposes for which the
EQUIPMENT ACCOUNTABILITY

original grant was made during the enitre useful life of

the equipment. If the recipient of the proposed equipment

does not fulfill this obligation, the Federal Government

may exercise its right to recover its proportionate share of
the residual value of said equipment from the so designated
recipient. The recipient of said equipment shall label

the equipment to distinguish it from all other equipment

within its facility, and keep appropriate records of the current
current status, location and eventual disposition of said
equipment at the completion of its useful life.

SUGGESTED FORMS
enero

Suggested forms are attached that May be utilized by RMPs to
transfer title and accountability for equipment purchased with

FMPS ‘funds to another appropriate institution.

A. Communication from grantee to RMPS requesting transfer

B. Communication from grantee to affiliate advising of
approval of transfer

C. Affiliate's certification re: continued use of equipment

48
 

iT ACCOUNTABILITY

EQUIPMEN

A

To: Regional Medical programs Service

From: “crantee tnscit

ution

val. Tf

the af-
£ transfer

nd use of

‘the requested transfer i ed for appre
approved by Regiona rvices
the time ©

¢iliated instituth

i11 be advised. at
qLlities for the main
yiate records » an
stucion not

e maintenance °
nt should che insti

rized Office, crantee qaetipution

Autho

oe

49
To

EQUIPMENT ACCOUNTABILITY

 

(Affiliated Institution)

From Grantee Institution

Transfer of title and accountability for the equipment listed
has been approved by the Regional Medical Programs Service.

You are advised that the following conditions apply:

1.

The equipment will continue to be used for the furtherance
of RMPS activities.

The equipment shall be labeled to distinguish if from all
other equipment within the facility.

Appropriate records will be kept of the current status,
location, and eventual disposition of said equipment at
the completion of its useful life. ‘
The Federal Government may exercise its right to recover
its proportionate share of the original value if said
equipment of. the above three conditions are not met.

 

Authorized Official, Grantee Institution

Equipment List

Item

ND Whe

I.D. No. Description Purchase Date Original Cost

50
 

EQUIPMENT ACCOUNTARTT-E TY

Cc

     

no Longer receiving Regional Medical program operational funding and
requests the transfer of title to and accountability for the equip-
ment listed. All 0 s purchased with .RMPS funds

¢ this equipment wa

    

(Project No. and Title)

te is hereby certified that all of the equipment listed will continue

to be used during its useful life for an activity which is approved

py the regional Medical programs service OT supportable under title IX
of the Act. In the event the equipment at any time ceases to be used,

Authorized Official, Affiliated
Institution

From

To Grantee Institution

The above requested transfer is recommended for approval.

Coordinator or Director

ooo
RMPS crant

51
If

APPLICABLE TO RMP ONLY

CONTRACTING BY GRANTEES

INTRODUCTION

In general, contracts may be used by grantee institutions for
(1) awards to affiliates and/or, (2) purchases of equipment,
supplies or services. The purpose of this chapter is to
outline recommended contracting procedures which will help
to avoid audit problems.

This chapter covers suggested procedures for both competi-
tive bidding and for sole source contracts. Discussion

of competitive bidding is necessarily more extensive than that
relating to sole source contracts. It should not be inferred,
however, that RMPS neceasarily prefers or requires competitive
bidding where contracts are used.

In making contracts, the grantee should follow its own institu-
tional policies. Where the grantee has no formal contracting
policies or where such policies are not as extensive as those
outined below, it is recommended that the procedures discussed
in this Sub-Chapter be followed.

USE OF CONTRACTS BY RMPS GRANTEES |

While the use of contracts for purchasing is generally well
understood, their use by RMPS grantees as a mechanism for allocating
grant funds to affiliates or other organizations for carrying out
the purposes of the grant requires some discussion.

A. Distinction Between Affiliation Agreements and Obligation of Funds

Most RMPS grantees have some form of written affiliation agree-
ment with the other institutions carrying out program staff

and operational activities. J- most cases, an affiliation
agreement can be regarded as a memorandum of understanding be-
tween the grantee and other parties, but is is not an award or
obligations of funds. It usually does not commit specific

amounts of grant funds to the affiliate, and the agreement usually
has an indeterminate life for the duration of the affiliate's
participation in the RMP program.

B. Obligation of Funds to Profit-making Organizations

While an affiliate must always be nonprofit, the grantee may
make use of the services of profit making firms. Profit
making firms may be paid from grant funds for the use of
facilities, the purchase of equipment and supplies, and for
services rendered. (These types of expenses are normally
budgeted under the "sub-contract" budget category for the
applicable activity.)

52
———————————————— an

CONTRACTING BY GRANTEES

C. Required Allocations Through Contracts

Grantees can allocate funds to affiliates or others through

either a contract or other instrument of commitment (i.e., a letter,
special purpose form, etc.) Contracts, however, must be used

to allocate grant funds when:

1. The funds are provided to a profit making firm.

2. Material having a security classification is involved.

3. Payment of an amount in excess of actual costs (i.e., a
profit or fee) is contemplated.

D. Choice of Methods for Allocation of Funds by Grantees

Except where contracts are required as indicated above,

the choice of whether qrantees should allocate funds

through contracts or other instruments is up to the grantee
- gnstitution.. Small purchases will usually be made through

purchase orders in accordance with institutional policy.

In general, a contract is considered to be the most desirable
mechanism for allocating funds when:

1. The funds are to be used for the purchase of a specified
service

2. The funds are to be used for the purchase of a particular
end product, such as a publication, report, or device.

3. Considerable direction and control: by the grantee is
required with respect to the manner of performance or
timing of the work.

4. The funds must be formally obligated within a specific time

period.

\

RMPS experience indicates that most grantees do not use formal
contracts in allocating funds to affiliates to carry out
specific activities. Usually, letters or other documents are
issued by the grantee indicating the amounts, purposes and
period for which funds are all:-ated, and the grantee relies
on the understandings in the affiliation agreement to insure
proper use of funds and compliance with federal and grantee
requirements. Dealing with affiliates in this manner pro-
vides greater financial flexibility than the usual contract
and enhances the RMPS concept of "cooperative arrangements"
among the institutions participating in 4 Regional Medical
Program.

The source of a proposal should not necessarily influence

the choice of an award mechanism. For example, a contract is
not necessarily required because the initiative for an activity
originated with an affiliate.

53

a
CONTRACTING BY GRANTEES

E. Types of Contracts

Where contracts are used, these may be of two types, (1) fixed
price, (2) cost-reimbursement. A fixed price contract may be
used where a definite cost can be established in advance. A.
cost-reimbursement contract, therefore, specifies an estimated
rather than an actual cost.

F. OQbligations and Expenditures

All contracts (and purchase orders) by grantees for RMP purposes
constitute obligations of grant funds for Federal accounting
purposes. Federal auditors have taken the position that other
forms of allocations do not constitute obligations.

 

Where a grantee makes a contract which continues beyond the
fiscal year of the grant, the funds are obligated immediately
(even though actually paid out later) and would be shown in

the entire amount of the contract on the expenditure report

for the fiscal year in which the contract was initiated,
Adjustments for any unexpended balance would be reported on the
expenditure report submitted for the subsequent fiscal year in

which the contract terminated,
III RECOMMENDED CONTRACTING PROCEDURES
EE EAL RAULING EROCEDURES

It is recommended that grantees follow the procedures recommended
below when making contracts involving RMPS funds.

 

A. Requests for Bids

Where competitive bidding is used, the grantee must prepare
a "Request for Bids" to inform potential contractors. The
"Request for Bids" should include the following information,
as applicable:

1. A "scope of work" statement which includes (1) a broad,
non-technical description of the work to be done or items
or services to be purchase, (2) Stages of work, technical
specifications, reports, drawings and publications.

2. The period of performance.

3. The quantity needed.

4. <A list of property to be furnished by the grantee or the
contractor, if any.

5. Delivery requirements.

6. Reports required. (e.g-, progress reports, etc.)

7. The initial dollar estimate of costs.

8. Required approvals and clearances.

9. Other necessary technical information or instructions.

10. A list of potential contractors, if known. ‘

A Reguest for Bids should be worded to make more than one in-
terpretation virtually impossible. It should state specifically ey
what the contractor and grantee are to do. Ambiguous work

Statements can lead to unsatisfactory performance, delays, and

disputes and noaarihiv ewocete 40 tu--- a .
CONTRACTING BY GRANTEES

When completed the Request for Bids can be disseminated
to potential pidders through advertising in appropriate
publication® or through direct notification by mail.

B. Evaluation of Bids

pids submitted should be evaluated from (1) 4 technical and
(2) a pus iness standpoint.

1. technical Evaluation

The technical evaluation of bids should be based on the
evaluation criteria contained in the “request” and a

a. qhe Contractor's understanding of the scope of work
as whown by the scientific and technical approach

proposed.

b. - availability and competence of experienced scientific
and technical personnel.

ce availability of necessary facilities:

d. Experience or pertinent novel ideas in the apecific
pranch of science involved.

e. The contractor's willingness to devote his resources
to the proposed work.

£. . The contractor's proposed pian for achieving the
quality of performance required.

B The reasonableness of the proposed ganhours; validity
of subcontracting» and the necessity of proposed travel.

After the offers are rated, 4 narrative statement should
be prepared expressing the strength or weakness of each
proposal and any reservations or qualifications that might
bear on the selection of the source of negotiation or award.

2. gusiness Evaluation

The business evaluation usually centers around cost
analysis and analysis of the contractor's ¢inancial
strength and management capability Elements considered

jabor costs, subcontracting, overhead rates, general
and administrative expense» travel costs, and profit or
fee. Elements considered in evaluating the contractor's
financial strength and management capability inc Llude
CONTRACTING BY GRANTEES

organization, past performance, reputation for reliability,
availability of required facilities, cost control, person-
nel practices, financial resources, etc,

Contract Issuance
ee RO SUANCE

1. Type of Contract

Once it is decided to issue a contract, a decision should
be made by responsible grantee personnel as to the most
effective contract instrument available, fixed price, or
cost reimbursement.

The influencing factors in selecting and negotiating a
contract are:

a. Type and complexity of the product or service.
b. Stability of the design.
¢. Prospective period of the contract performance.

d. Adequacy of the contractor's estimating and accounting
system.

e. Urgency of the requirement. ‘
f. Degree of the competition,

g- Availability of the comparative cost or pricing
' data, market prices, and wage levels;

h. Administrative cost to both parties.

2. Negotiation

Once the type of contract is determined, negotiations normally
commence between the représentative of the grantee institu-
tion and the proposed contractor. The contract negotiation
will usually entail;

a. Reaching agreement with a Proposed contractor on
the technical requirements --which is included
in the Workscope (if there is a true change in the
requirements, all offerors must be given an Opportunity
to revise their proposals. )

b. Reaching an agreement on the type of contrac ~-the

objective is to negotiate that type of contract
and price which includes a reasonable amount of

' cost responsibility and risk to the contractor,
while at the same time, providing him with the
greatest incentive for efficient and economical
performance.

56 $l
D.

CONTRACTING BY GRANTEES

c. Reaching an agreement on the pricing and all other
provisions which will condition his performance of
the contract.

d. Setting forth all terms and conditions in a mutually
acceptable contractual document which includes terms
and conditions required in relation to (1) civil rights,
‘and (2) wage rates and related matters as specified in
Section 904 of the Act.

 

e. Justifying and documenting the contract negotiated.

Contract Administration

Once the contract is issued and performance commences, the
grantee institution should assign a project officer to
administer the contract. This function will normally entail
the following:

1.

Monitoring of Performance

The project officer should be responsible for providing
technical assistance and monitoring the performance of
the contract. It is.essential that he monitor a con-
tractor's progress closely and identify problems that
threaten contract performance so that remedial measures
may be taken if necessary. The contractor should usually ,
be required to submit periodic progress reports which
could be used by the project officer to evaluate con-
tractual progress. These reports should provide the
project officer with most of the information necessary
regarding the progress of the work.

The terms of the contract govern and they can only be modified
by the Project Officer after he has reached an agreement with
the contractor.

2.

3.

Contract. Modifications

 

During the administration of a contract, different types
of modifications may be necessary to incorporate new
requirements or to handle contingencies which may develop
after contract placement. The project officer must be
careful in distinguishing between a modification and a

new contract.

Property Administration

When property is provided by a grantee to 4 contractor,

the project officer should be called upon to advise or
assist in the acquistion and/or utilization of property

to be furnished. His assistance or advice may be required:

a. In determining the necessity for the property to be provided.
CONTRACTING BY GRANTEES

 

b. In determining the kind and quantity of property required
and the period of use.
c. In ensuring proper utilization of property.

4. Inspection and Acceptance \

The project officer must ensure that the work performed
under the contract is measured against the work statement.
If performance does not meet contract requirements, it is
incumbent upon the project officer to identify deficiencies,
and plan for remedial action that can be taken.

Once final acceptance of the work effort by the project
officer has been accomplished, the contractor is no longer
responsible for unsatisfactory effort. This concludes
performance by the contractor, except for administrative
details relating to contract closing.

5. Gontract Closing

A contract is completed when all services have been

rendered, all articles, material, reports data, exhibits, etc.,
have been delivered and accepted; all administrative actions
accomplished; and final payment has been made to the con-

tractor.

 

Final Audit and Close-out

Upon the physical completion of the contract, action should
be taken to provide assurance that:

1. All services have been rendered.

2. All.articles have been delivered and accepted.

3. All payments and collections have been accomplished.

4&4. Release from liabilities, obligations, and claims have
been executed by the contrec“or.

5. All administrative actions have been completed, including
disputes, protests, litigation, determination of final
overhead rates, release of funds, etc.

Before final payment is made under a cost-reimbursement type
contract, a representative of the grantee institution should
verify the allowability and reasonableness of all costs re-
imbursed. When appropriate, verification of total costs
reimbursed can be obtained from the DHEW audit agency in the

form of a final audit report. Similar verification of actual
costs must be made for fixed price contracts when costs incentives
or price redetermination is involved.

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