ARCHIVED - NIH Grants Policy Statement (10/03)
NIH Grants Policy Statement
Part II: Terms and Conditions of NIH Grant Awards
Subpart A: General -- File 5 of 5
Program income is gross income—earned by a grantee, a consortium participant, or a contractor under a grant—that was directly generated by the grant-supported activity or earned as a result of the award. Program income includes, but is not limited to, income from fees for services performed; charges for the use or rental of real property, equipment or supplies acquired under the grant; the sale of commodities or items fabricated under an award; charges for research resources; and license fees and royalties on patents and copyrights. (Note: Program income from license fees and royalties from copyrighted material, patents, and inventions is exempt from reporting requirements.) The requirements for accountability for these various types of income under NIH grants are specified in this subsection. Accountability refers to whether NIH will specify how the income is to be used and whether the income needs to be reported to NIH and for what length of time. Unless otherwise specified in the terms and conditions of the award, NIH grantees are not accountable for program income accrued after the period of grant support.
NIH applies the additive alternative to all grantees, including for-profit entities, unless there is a concern with the recipient or activity and NIH uses special terms and conditions, or the program requires a different program income alternative. NIH may require a different use of program income if a grantee has deficient systems; if the PI has a history of frequent, large annual unobligated balances on previous grants; or if the PI has requested multiple extensions of the final budget period of the project period. Regardless of the alternative applied, program income may be used only for allowable costs in accordance with the applicable cost principles and the terms and conditions of the award.
Consortium agreements and contracts under grants are subject to the terms of the agreement or contract with regard to the income generated by the activities, but the terms specified by the grantee must be consistent with the requirements of the grant award. Program income must be reported by the grantee as discussed in this subsection.
Program income earned during the period of grant support (other than income earned as a result of copyrights, patents, or inventions or as a result of the sale of real property, equipment, or supplies) shall be retained by the grantee and, as specified by NIH in the NGA, may be used in one or a combination of the ways indicated in Exhibit 6.
Sale of Real Property, Equipment, and Supplies
The requirements that apply to the sale of real property are addressed in “Construction Grants.” For equipment and supplies purchased under NIH grants for basic or applied research by non-profit institutions of higher education or non-profit organizations whose principal purpose is the conduct of scientific research, the grantee is exempt from any requirement to account to NIH for proceeds from the sale of the equipment or supplies; however, NIH has certain rights with respect to such property as specified in “Administrative Requirements—Management Systems and Procedures—Property Management System Standards.”
All other types of grants and grantees are subject to the requirements in 45 CFR 74.34 or 92.32, if title to the equipment vests in the grantee rather than in NIH. If the grant-supported project or program for which equipment was acquired is still receiving NIH funding at the time of sale, the grantee must credit the NIH share of the proceeds to the grant and use that amount under the deductive alternative for program income. If the grantee is no longer receiving NIH grant support, the amount due should be paid in accordance with instructions from NIH. These grants and grantees also are subject to the requirements in 45 CFR 74.35 or 92.33 with respect to the use or sale of unused supplies. If the grantee retains the supplies for use on other than federally sponsored activities, an amount is due NIH as if they were sold.
The amount of program income earned and the amount expended must be reported on the FSR (SF 269—Long Form). Any costs associated with the generation of the gross amount of program income that are not charged to the grant should be deducted from the gross program income earned, and the net program income should be the amount reported. Program income subject to the additive alternative must be reported on lines 10r and 10s, as appropriate, of the FSR; program income subject to the deductive alternative must be reported on lines 10c and 10q of the FSR; and program income subject to the matching alternative must be reported on lines 10g and 10q of the FSR. (See “Administrative Requirements—Monitoring—Reporting—Financial Reporting.”) For awards under SNAP, the amount of program income earned must be reported in the non-competing grant progress report.
Income resulting from royalties or licensing fees is exempt from reporting as program income.
Income earned from the sale of equipment must be reported on the FSR for the period in which the proceeds are received in accordance with the reporting requirements for the program income alternative specified. Amounts due NIH for unused supplies must be reflected as a credit to the grant on line 10c of the FSR.
When the terms of the NGA, including the NIHGPS, do not specify any accountability requirement for income earned, no reporting of income is required. Reporting requirements for accountable income accrued after grant support ends will be specified in the NGA.
NIH grantees do not have to report program income resulting from royalties or licensing fees from sale of copyrighted material unless specific terms and conditions of the award provide otherwise. The NGA may include special terms and conditions if commercialization of an invention is an anticipated outcome of a research project.
However, the regulations implementing the Bayh-Dole Act (37 CFR 401.14(h)) require reporting of income resulting from NIH-funded inventions and patents. Specifically, as part of the annual invention utilization report, grantees must report income generated by all subject inventions to which title has been elected and by inventions (“research tools”) that have been licensed but not patented (see “Administrative Requirements—Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources“ and “Administrative Requirements—Monitoring—Reporting“).
Generally, grantees may use their own property management policies and procedures for property purchased, constructed, or fabricated as a direct cost using NIH grant funds, provided they observe the requirements in 45 CFR 74.31 through 74.37 or 92.31 through 92.34, as applicable, and the following.
The dollar threshold for determining the applicability of several
of the requirements in those regulations is based on the unit acquisition cost
of an item of equipment. As defined in
Grantees are required to be prudent in the acquisition of property under a grant-supported project. It is the grantee’s responsibility to conduct a prior review of each proposed property acquisition to ensure that the property is needed and that the need cannot be met with property already in the possession of the organization. If prior approval is required for the acquisition, the grantee must ensure that appropriate approval is obtained in advance of the acquisition. The grantee also must follow appropriate procurement procedures in acquiring property as specified in “Administrative Requirements—Management Systems and Procedures—Procurement System Standards and Requirements.”
Recipients of NIH grants other than Federal institutions cannot be authorized to use Federal supply sources.
See “Construction Grants—Administrative Requirements—Real Property Management Standards” for requirements that apply to the acquisition, use, and disposition of real property. Fixed equipment that is part of a construction grant is subject to those requirements.
In general, title to equipment and supplies acquired by a grantee with NIH funds vests in the grantee upon acquisition, subject to the property management requirements of 45 CFR 74.31, 74.34, 74.35, and 74.37, or 92.32 and 92.33. Limited exceptions to these general rules are States, which may use, manage, and dispose of equipment acquired under a grant in accordance with State laws and procedures, and certain research grant recipients with exempt property. These requirements do not apply to equipment for which only depreciation or use allowances are charged, donated equipment, or equipment acquired primarily for sale or rental rather than for use.
Under the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 6306, NIH may permit non-profit institutions of higher education and non-profit organizations whose primary purpose is the conduct of scientific research to obtain title to equipment and supplies acquired under grants for support of basic or applied scientific research without further obligation to the Federal government. However, there is one exception: NIH has the right to require transfer of title to equipment with an acquisition cost of $5,000 or more to the Federal government or to an eligible third party named by the NIH awarding office under the conditions specified in 45 CFR 74.34(h). NIH may exercise this right within 120 days of the completion or termination of an award or within 120 days of receipt of an inventory, as provided in 45 CFR 74.34(h)(2), whichever is later.
All other equipment and supplies acquired under all other NIH grant-supported projects by any other type of grantee are subject to the full range of acquisition, use, management, and disposition requirements of 45 CFR 74.34 and 74.35, or 45 CFR 92.32 and 92.33. Property acquired or used under an NIH grant-supported project, including any federally owned property, also is subject to the requirements for internal control specified in 45 CFR 74.21 or 92.20. Pursuant to 45 CFR 74.37, equipment (and intangible property and debt instruments) acquired with, or improved with, NIH funds must not be encumbered without NIH approval.
The grantee’s management system for equipment must meet the requirements of 45 CFR 74.34(f) or 92.32, which include the following:
l Records that adequately identify (according to the criteria specified in the regulations) items of equipment owned or held by the grantee and state the current location of each item
l A physical inventory of the equipment, at least once every 2 years, to verify that the items in the records exist and either are usable and needed or are surplus (a statistical sampling basis is acceptable)
l Control procedures and safeguards to prevent loss, damage, and theft
l Adequate maintenance procedures to keep the equipment in good condition
l Proper sales procedures when the grantee is authorized to sell the equipment.
For items of equipment having a unit acquisition cost of $5,000 or more, NIH has the right to require transfer title to the equipment to the Federal government or to an eligible third party named by the NIH awarding office under the conditions specified in 45 CFR 74.34(h) and 92.32, respectively. This right applies to nonexempt property acquired by all types of grantees, including Federal institutions, under all types of grants under the stipulated conditions.
If there is a residual inventory of unused supplies exceeding $5,000 in aggregate fair market value upon termination or completion of the grant and if the supplies are not needed for other federally sponsored programs or projects, the grantee may either retain them for use on other than federally sponsored activities or sell them, but, in either case, the grantee must compensate the NIH awarding office for its share as a credit to the grant.
Recipients of NIH grants must not use equipment acquired with grant funds to provide services for a fee to compete unfairly with private companies that provide equivalent services, unless the terms and conditions of the award provide otherwise.
As permitted under Federal property management statutes and regulations and NIH property management policies, federally owned tangible personal property may be made available to grantees under a revocable license agreement. The revocable license agreement between NIH and the grantee provides for the transfer of the equipment for the period of grant support under the following conditions:
l Title to the property remains with the Federal government.
l NIH reserves the right to require the property to be returned to the Federal government should it be determined to be in the best interests of the Federal government to do so.
l The use to which the grantee puts the property does not permanently damage it for Federal government use.
property is controlled and maintained in accordance with the requirements of
Grantees may acquire a variety of goods or services in
connection with a grant-supported project, ranging from those that are
routinely purchased goods or services to those that involve substantive
programmatic work. States may follow the same policies and procedures they use
for procurements from non-Federal funds. All other grantees must follow the
A contract under a grant must be a written agreement between the grantee and the third party. The contract must, as appropriate, state the activities to be performed; the time schedule; the policies and requirements that apply to the contractor, including those required by 45 CFR 74.48 or 92.36(i) and other terms and conditions of the grant (these may be incorporated by reference where feasible); the maximum amount of money for which the grantee may become liable to the third party under the agreement; and the cost principles to be used in determining allowable costs in the case of cost-type contracts. The contract must not affect the grantee’s overall responsibility for the direction of the project and accountability to the Federal government. Therefore, the agreement must reserve sufficient rights and control to the grantee to enable it to fulfill its responsibilities.
When a grantee enters into a service-type contract in which the term is not concurrent with the budget period of the award, the grantee may charge the costs of the contract to the budget period in which the contract is executed even though some of the services will be performed in a succeeding period if the following conditions are met:
l The NIH awarding office has been made aware of this situation either at the time of application or through post-award notification.
l The project has been recommended for a project period extending beyond the current year of support.
l The grantee has a legal commitment to continue the contract for its full term.
However, costs will be allowable only to the extent that they are for services provided during the period of NIH support. To limit liability if continued NIH funding is not forthcoming, it is recommended that grantees insert a clause in such contracts of $100,000 or less stipulating that payment beyond the end of the current budget period is contingent on continued Federal funding. The contract provisions prescribed by 45 CFR 74.48 and 92.36(i)(2) specify termination provisions for contracts in excess of $100,000.
The procurement standards in 45 CFR 74.44 and 92.36(g) allow NIH to require approval of specific procurement transactions under the following circumstances (and provide a mechanism for governmental grantees to be exempt from this type of review):
l A grantee’s procurement procedures or operations do not comply with the procurement standards required by those regulations.
l The procurement is expected to exceed the “simplified acquisition threshold” (currently $100,000) (formerly the “small purchase threshold”) established by the Federal Property and Administrative Services Act, as amended, and is to be awarded without competition or only one bid or proposal is received in response to a solicitation.
l A procurement that will exceed the simplified acquisition threshold specifies a “brand name” product.
l A proposed award over the simplified acquisition threshold is to be awarded to other than the apparent low bidder under a sealed-bid procurement.
l A proposed contract modification changes the scope of a contract or increases the contract amount by more than the amount considered to be a simplified acquisition.
When NIH prior approval is required, the grantee must make available sufficient information to enable review. This may include, at NIH discretion, presolicitation technical specifications or documents, such as requests for proposals or invitations for bids, or independent cost estimates. Approval may be deferred pending submission of additional information by the applicant or grantee or may be conditioned on the receipt of additional information. Any resulting NIH approval does not constitute a legal endorsement of the business arrangement by the Federal government nor does such approval establish NIH as a party to the contract or any of its provisions.
Grantees must make positive efforts to use small businesses, minority-owned firms, and women’s business enterprises as sources of goods and services whenever possible. Grantees are required to take the following steps to implement this policy:
l Place qualified small, minority, and women-owned business enterprises on solicitation lists.
l Ensure that small, minority, and women-owned business enterprises are solicited whenever they are potential sources.
l Consider contracting with consortia of small businesses, minority-owned businesses, or women’s business enterprises when an intended contract is too large for any one such firm to handle on its own or, if economically feasible, divide larger requirements into smaller transactions for which such organizations might compete.
l Make information on contracting opportunities available and establish delivery schedules that encourage participation by small, minority, and women-owned business enterprises.
l Use the services and assistance of the SBA and DoC’s Minority Business Development Agency, as appropriate.
l If subcontracts are to be let, require the prime contractor to take the affirmative steps listed above.
Grantees are responsible for managing the day-to-day operations of grant-supported activities using their established controls and policies, as long as they are consistent with NIH requirements. However, to fulfill their role in regard to the stewardship of Federal funds, NIH awarding offices monitor their grants to identify potential problems and areas where technical assistance might be necessary. This active monitoring is accomplished through review of reports and correspondence from the grantee, audit reports, site visits, and other information available to NIH. The names and telephone numbers of the individuals responsible for monitoring the programmatic and business management aspects of a project or activity will be provided to the grantee at the time of award.
Monitoring of a project or activity will continue for as long as NIH retains a financial interest in the project or activity as a result of property accountability, audit, and other requirements that may continue for a period of time after the grant is administratively closed out and NIH is no longer providing active grant support (see “Administrative Requirements—Closeout”).
NIH requires that grantees periodically submit financial and progress reports. Other required reports may include annual invention utilization reports, lobbying disclosures, audit reports, reports to the appropriate payment points (in accordance with instructions received from the payment office), and specialized programmatic reports. Grantees also are expected to publish and provide information to the public on the objectives, methodology, and findings of their NIH-supported research activities, as specified in “Administrative Requirements—Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources.”
The GMO is the receipt point for most required reports, including non-competing and final grant progress reports, final invention statements and certifications, and lobbying disclosure statements. Non-competing grant progress reports must be submitted in an original and two copies. Submission of these reports to individuals other than the GMO may result in delays in processing of the non-competing continuation award or the submission being considered delinquent. FSRs are to be submitted to OFM (see “Financial Reports” in this subsection) unless otherwise indicated in the award’s terms and conditions.
Grantees are allowed a specified period of time in which to submit required financial and final progress reports (see 45 CFR 74.51 and 74.52, 92.40 and 92.41, and the discussion in this subsection). Failure to submit complete, accurate, and timely reports may indicate the need for closer monitoring by NIH or may result in possible award delays or enforcement actions, including withholding, removal of expanded authorities, or conversion to a reimbursement payment method (also see “Administrative Requirements—Enforcement Actions”). The schedule for submission of the non-competing grant progress report is discussed in the next subsection.
Progress reports usually are required annually as part of the non-competing continuation award process. However, NIH may require these reports more frequently. The “Grant Progress Report” (PHS 2590) or equivalent documentation must be submitted to, and approved by, NIH to non-competitively fund each additional budget period within a previously approved project period (competitive segment). Except for awards subject to SNAP, the progress report includes an updated budget in addition to other required information.
The information to be included in the progress report is specified in the PHS 2590 instructions, which also include alternate instructions for awards under SNAP (as described in the next subsection). Forms for non-competing grant progress reports are available at http://grants.nih.gov/grants/funding/2590/2590.htm.
Non-competing grant progress reports must be submitted directly to the awarding office. Grantees should routinely query and review the list of pending grant progress reports and due dates available at the NIH website (http://era.nih.gov/commons/quick_queries/index.cfm#progress). Late submission or receipt of an incomplete grant progress report will result in delaying the issuance and funding of the non-competing continuation award and may result in a reduced award amount.
The progress report for the final budget period of a competitive segment for which a competing continuation application is submitted will be part of that application; however, if an award is not made or the grantee does not submit an application for continued support, a final progress report is required (see “Administrative Requirements—Closeout—Final Reports—Final Progress Report”).
The NIH awarding office will specify the requirements for progress reporting under construction grants or grants supporting both construction activities, including acquisition or modernization, and nonconstruction activities.
The NGA will specify whether an award is subject to SNAP. Award mechanisms routinely included in SNAP are “R” awards, with the exception of R35 and K awards. Award mechanisms excluded From SNAP are those that do not have the expanded authority to automatically carry over unobligated balances (centers; cooperative agreements, Kirschstein-NRSA institutional research training grants, non-Fast Track Phase I SBIR and STTR awards), clinical trials (regardless of mechanism), P01, R35, and awards to individuals. In addition, individual awards under any mechanism may be excluded from SNAP if
l they require close project monitoring or technical assistance, e.g., high-risk grantees, certain large individual or multi-project grants, or grants with significant unobligated balances, or
l the grantee has a consistent pattern of failure to adhere to appropriate reporting or notification deadlines.
Under SNAP, the GMO negotiates the direct costs for the entire competitive segment at the time of the competing award or, in the case of modular awards, determines the applicable number of modules for each budget period within the competitive segment. This eliminates the need for annual budget submissions and any negotiations, and reduces the information NIH requires to review and approve non-competing continuation awards and to monitor these awards. As a result, for awards under SNAP, grantees are required to submit only limited portions of the Grant Progress Report. If there is a change in performance site or anticipated program income, grantees also must submit the PHS 2590 checklist. If program income is anticipated, the progress report should reflect the estimated amount and source of the income.
As part of the progress report, grantees must answer the following questions:
l Has there been a change in the “other support” of key personnel since the last reporting period? If so, the changes, including termination of a previously active grant or activation of a previously pending grant, must be explained. If not, the grantee must so state.
l In the next budget period, will there be a significant change in the level of effort for key personnel from what was approved for this project? A “significant change” is a 25 percent or greater reduction in time devoted to the project. If so, the grantee must explain. If not, the grantee must so state.
l Does the grantee anticipate that it will have an estimated unobligated balance (including prior-year carryover) that will be greater than 25 percent of the current year’s total budget? If so, the grantee will be required to explain why there is a significant balance and how it will be spent if carried forward into the next budget period. If not, the grantee should so state.
The awarding office will rely on the grantee’s assessment of whether significant changes have occurred or will occur in these areas; however, the GMO may require additional information to evaluate the project for continued funding. Failure to provide this information will result in a delayed award.
For awards under SNAP (other than awards to foreign organizations or Federal institutions), an FSR is required only at the end of a competitive segment rather than annually. The FSR must be submitted within 90 days after the end of the competitive segment and must report on the cumulative support awarded for the entire segment. An FSR must be submitted at this time whether or not a competing continuation award is made. If no further award is made, this report will serve as the final FSR (see “Administrative Requirements—Closeout”). For awards under SNAP, grantees (other than foreign grantees and Federal institutions) also are required to submit a quarterly FCTR (SF 272) to PMS. Foreign organizations and Federal institutions must submit an annual FSR even if an award is under SNAP. (Also see “Administrative Requirements—Monitoring—Reporting—Financial Reports.”)
Reports of expenditures are required as documentation of the financial status of grants according to the official accounting records of the grantee organization. Financial or expenditure reporting is accomplished using the FSR (SF 269 or SF 269 A); the grantee must use the long form (SF 269) to report program income earned and used.
Except for awards under SNAP and awards that require more frequent reporting, the FSR is required on an annual basis. An annual FSR is required for awards to foreign organizations and Federal institutions, whether or not they are under SNAP. When required on an annual basis, the report must be submitted for each budget period no later than 90 days after the close of the budget period. The report also must cover any authorized extension in time of the budget period. If more frequent reporting is required, the NGA will specify both the frequency and due date.
For domestic awards under SNAP, in lieu of the annual FSR, NIH will use the quarterly FCTR, submitted to PMS to monitor the financial aspects of grants. The GMO may review the report for patterns of cash expenditures, including accelerated or delayed drawdowns, and to assess whether performance or financial management problems exist. For these awards, an FSR is required only at the end of a competitive segment. It must be submitted within 90 days after the end of the competitive segment and must report on the cumulative support awarded for the entire segment. An FSR must be submitted at this time whether or not a competing continuation award is made. If no further award is made, this report will serve as the final FSR (see “Administrative Requirements—Closeout”).
FSRs may be transmitted electronically to OFM through NIH’s eRA Commons website at https://commons.era.nih.gov/commons. Before submitting FSRs to NIH, grantees must ensure that the information submitted is accurate, complete, and consistent with the grantee’s accounting system. The AOO’s signature on the FSR certifies that the information in the FSR is correct and complete and that all outlays and obligations are for the purposes set forth in grant documents, and represents a claim to the Federal government. Filing a false claim may result in the imposition of civil or criminal penalties.
Disposition of unobligated balances is determined in accordance with the terms and conditions of the award. (See “Administrative Requirements—Changes in Project and Budget” for NIH approval authorities for unobligated balances.) Using the principle of “first in-first out,” unobligated funds carried over are expected to be used before newly awarded funds.
Upon receipt of the annual FSR for awards other than those with authority for the automatic carryover of unobligated balances, the GMO will compare the total of any unobligated balance shown and the funds awarded for the current budget period with the NIH share of the approved budget for the current budget period. If the funds available exceed the NIH share of the approved budget for the current budget period, the GMO may select one of the following options:
l In response to a written request from the grantee, revise the current NGA to authorize the grantee to spend the excess funds for additional approved purposes
l Offset the current award or a subsequent award by an amount representing some or all of the excess.
In some cases the grantee may have to revise or amend a previously submitted FSR. When the revision results in a balance due to NIH, the grantee must submit a revised FSR whenever the overcharge is discovered, no matter how long the lapse of time since the original due date of the report. Revised expenditure reports representing additional expenditures by the grantee that were not reported to NIH within the 90-day time frame may be submitted to the GMO with an explanation for the revision. The explanation also should indicate why the revision is necessary and describe what action is being taken by the grantee to preclude similar situations in the future. This should be done as promptly as possible, but no later than 1 year from the due date of the original report, i.e., 15 months following the end of the budget period (or competitive segment for awards under SNAP). If an adjustment is to be made, the NIH awarding office will advise the grantee of actions it will take to reflect the adjustment. NIH will not accept any revised report received after that date and will return it to the grantee.
A complete list of the reporting requirements under the Bayh-Dole Act can be found at 37 CFR 401.14. The requirements also are specified in “Administrative Requirements—Availability of Research Results: Publications, Intellectual Property Rights, and Sharing Research Resources.”
In addition to complying with Bayh-Dole-related regulations, each NIH competing grant application and non-competing progress report must indicate whether or not any subject inventions were made during the preceding budget period. If inventions were made, the grantee must also indicate whether they were reported.
The grantee also must submit an annual invention utilization report for all subject inventions to which title has been elected and inventions that have been licensed but not patented (research tools). The utilization report provides a way to evaluate the extent of commercialization of subject inventions, consistent with the objectives of the Bayh-Dole Act.
A grantee’s failure to comply with invention reporting requirements may result in the loss of patent rights or a withholding of grant funds.
Bayh-Dole regulations allow grantees to report inventions electronically (37 CFR 401.16). NIH strongly supports electronic reporting through an Internet-based system, Interagency Edison (https://s-edison.info.nih.gov/iEdison/). To meet the objectives of the Federal Financial Assistance Management Improvement Act of 1999 (P.L. 106-107), grantees should make all reasonable efforts to submit invention reports using iEdison. The system supports confidential transmission of required information and provides a utility for generating reports and reminders of pending reporting deadlines. Further information about the system, including instructions for creating an account needed to submit reports electronically, are on the iEdison site. Grantees also may contact NIH at
Extramural Inventions and Technology Resources Branch
Office of Policy for Extramural Research Administration
Office of Extramural Research
6705 Rockledge Drive, MSC 7980
Bethesda, MD 20892-7980
Grantees generally must retain financial and programmatic records, supporting documents, statistical records, and all other records that are required by the terms of a grant, or may reasonably be considered pertinent to a grant, for a period of 3 years from the date the annual FSR is submitted. For awards under SNAP (other than those to foreign organizations and Federal institutions), the 3-year retention period will be calculated from the date the FSR for the entire competitive segment is submitted. Those grantees must retain the records pertinent to the entire competitive segment for 3 years from the date the FSR is submitted to NIH. Foreign organizations and Federal institutions must retain records for 3 years from the date of submission of the annual FSR to NIH. See 45 CFR 74.53 and 92.42 for exceptions and qualifications to the 3-year retention requirement (e.g., if any litigation, claim, financial management review, or audit is started before the expiration of the 3-year period, the records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken). Those sections also specify the retention period for other types of grant-related records, including F&A cost proposals and property records. See 45 CFR 74.48 and 92.36 for record retention and access requirements for contracts under grants.
An audit is a systematic review or appraisal made to determine whether internal accounting and other control systems provide reasonable assurance of the following:
l Financial operations are properly conducted.
l Financial reports are timely, fair, and accurately.
l The entity has complied with applicable laws, regulations, and other grant terms.
l Resources are managed and used economically and efficiently.
l Desired results and objectives are being achieved effectively.
NIH grantees (other than Federal institutions) are subject to the audit requirements of OMB Circular A-133, as implemented by 45 CFR 74.26 and 92.26, or the audit requirements stated in 45 CFR 74.26(d) and in the NIHGPS (for types of organizations to which OMB Circular A-133 does not directly apply). In general, OMB Circular A-133 requires a State government, local government, or non-profit organization (including institutions of higher education) that expends $500,000 or more per year under Federal grants, cooperative agreements, and/or procurement contracts to have an annual audit by a public accountant or a Federal, State, or local governmental audit organization. The audit must meet the standards specified in generally accepted government auditing standards (GAGAS). The audit requirements for foreign grantees and for-profit grantees are addressed in the sections of this NIHGPS that provide specific requirements for those types of grantees.
When a grantee procures audit services, the procurement must comply with the procurement standards of 45 CFR Part 74 or 92, as applicable, including obtaining competition and making positive efforts to use small businesses, minority-owned firms, and women’s business enterprises. Grantees should ensure that comprehensive solicitations made available to interested firms include all audit requirements and specify the criteria to be used for selection of the firm. Grantees’ written agreements with auditors must specify the rights and responsibilities of each party.
OMB Circular A-133 explains in detail the scope, frequency, and other aspects of the audit. Some highlights of this Circular are as follows:
l Covered organizations expending $500,000 or more per year in Federal awards are required to have an audit made in accordance with the Circular. However, if the awards are under one program, the organization can have either a single organization-wide audit or a program-specific audit of the single program, subject to the provisions of section 235 of the Circular. NIH’s research awards may not be considered a single program for this purpose. Covered organizations expending less than $500,000 in any year are exempt from these audit requirements in that year but must have their records available for review as required by “Administrative Requirements—Monitoring—Record Retention and Access.”
l The reporting package must contain the following:
Ø Financial statements and schedule of expenditures of Federal awards
Ø Independent auditor’s report, including an opinion on the financial statements and the schedule of expenditures of Federal awards, a report on compliance and internal control over financial reporting, and a report on compliance with requirements applicable to each major program and on internal control over such compliance requirements
Ø A schedule of findings and questioned costs
Ø If applicable, a summary of prior audit findings and a corrective action plan.
l An audit under OMB Circular A-133 is in lieu of a financial audit of individual Federal awards. However, Federal agencies may request additional audits necessary to carry out their responsibilities under Federal law or regulation. Any additional audits will build upon work performed by the independent auditor.
l The data collection form and copies of the reporting package must be submitted to the FAC at the following address:
Federal Audit Clearinghouse
If the schedule of findings and questioned costs discloses an audit finding related to an HHS or NIH award or if the schedule of prior audit findings reports the status of any audit finding relating to an HHS or NIH award, the FAC will provide copies of the audit report to NEARC, OIG, HHS. NEARC will, in turn, distribute them within HHS for further action, as necessary. Audit reports should not be sent directly to the GMO.
Recipients must follow a systematic method for ensuring timely and appropriate resolution of audit findings and recommendations, whether discovered as a result of a Federal audit or a recipient-initiated audit. Grantees usually are allowed 30 days from the date of request to respond to the responsible audit resolution official (Action Official) concerning audit findings. Failure to submit timely responses may result in cost disallowance or other actions by NIH or HHS. At the completion of the audit resolution process, the grantee will be notified of the Action Official’s final decision. The grantee may appeal this decision if the adverse determination is of a type covered by the NIH or HHS grant appeals procedures (see “Administrative Requirements—Grant Appeals Procedures”). Refunds owed to the Federal government as a result of audit disallowances must be made in accordance with instructions issued by the Action Official or OFM.
It is imperative that grantees submit required OMB Circular A-133 audits within the time limits specified in the Circular. If grantees are delinquent in complying with the provisions of the Circular, HHS or NIH will impose sanctions that may result in the loss of Federal funds. No audit costs will be allowed either as F&A costs or direct costs to Federal awards if the required audits have not been completed or have not been conducted in accordance with the provisions of OMB Circular A-133.
See “Cost Considerations—Selected Items of Cost” for the allowability of audit costs.
A grantee’s failure to comply with the terms and conditions of award, including confirmed instances of research misconduct, may cause NIH to take one or more enforcement actions, depending on the severity and duration of the non-compliance. NIH will undertake any such action in accordance with applicable statutes, regulations, and policies. NIH generally will afford the grantee an opportunity to correct the deficiencies before taking enforcement action unless public health or welfare concerns require immediate action. However, even if a grantee is taking corrective action, NIH may take proactive action to protect the Federal government’s interests, including placing special conditions on awards or precluding the grantee from obtaining future awards for a specified period, or may take action designed to prevent future non-compliance, such as closer monitoring. If NIH imposes sanctions on a grantee as a result of research misconduct or will more closely monitor an award(s) through the use of special conditions, NIH will share this information with other HHS components.
During grant performance, the GMO may include special conditions in the award to require correction of identified financial or administrative deficiencies. When the special conditions are imposed, the GMO will notify the grantee of the nature of the conditions, the reason why they are being imposed, the type of corrective action needed, the time allowed for completing corrective actions, and the method for requesting reconsideration of the conditions. See 42 CFR 52.9 and 45 CFR 74.14 or 92.12.
The awarding office also may withdraw approval of the PI or other key personnel if there is a reasonable basis to conclude that the PI and other key personnel are no longer qualified or competent to perform. In that case, the awarding office may request that the grantee designate a new PI or other key personnel.
The decision to modify the terms of an award—by imposing special conditions, by withdrawing approval of the PI or other key personnel, or otherwise—is discretionary on the part of the NIH awarding office.
If a grantee has failed to materially comply with the terms and conditions of award, NIH may suspend the grant, pending corrective action, or may terminate the grant for cause. The regulatory procedures that pertain to suspension and termination are specified in 45 CFR 74.61 and 74.62, and in 92.43.
NIH generally will suspend (rather than immediately terminate) a grant and allow the grantee an opportunity to take appropriate corrective action before NIH makes a termination decision. NIH may decide to terminate the grant if the grantee does not take appropriate corrective action during the period of suspension. NIH may terminate—without first suspending—the grant if the deficiency is so serious as to warrant immediate termination or public health or welfare concerns require immediate action. Termination for cause may be appealed under the NIH and HHS grant appeals procedures (see “Administrative Requirements—Grant Appeals Procedures”). Pending the outcome of an appeal or other action by the grantee, NIH may award a replacement grant for a limited period of time (up to 18 months) without competition.
A grant also may be terminated, partially or totally, by the grantee or by NIH with the consent of the grantee. If the grantee decides to terminate a portion of a grant, NIH may determine that the remaining portion of the grant will not accomplish the purposes for which the grant was originally awarded. In any such case, NIH will advise the grantee of the possibility of termination of the entire grant and allow the grantee to withdraw its termination request. If the grantee does not withdraw its request for partial termination, NIH may initiate procedures to terminate the entire grant for cause.
See “Cost Considerations—Selected Items of Cost” for the allowability of termination costs. Allowability of these costs does not vary whether a grant is terminated for cause by NIH, terminated at the request of the grantee, or terminated by mutual agreement.
Withholding of support is a decision not to make a non-competing continuation award within the current competitive segment. Support may be withheld for one or more of the following reasons:
l Adequate Federal funds are not available to support the project.
l A grantee failed to show satisfactory progress in achieving the objectives of the project.
l A grantee failed to meet the terms and conditions of a previous award.
l For whatever reason, continued funding would not be in the best interests of the Federal government.
If a non-competing continuation award is denied (withheld) because the grantee failed to comply with the terms and conditions of a previous award, the grantee may appeal that determination.
Depending on the nature of the deficiency, NIH may use other means of obtaining grantee compliance. Other options available to NIH include, but are not limited to, temporary withholding of payment or other actions specified at 45 CFR 74.62 or 92.43, conversion from an advance payment method to a reimbursement method, suspension or debarment under 45 CFR Part 76, and other available legal remedies, such as civil action. Suspension under 45 CFR Part 76 is a distinct action from “suspension” as a post-award remedy described under “Suspension, Termination, and Withholding of Support” in this subsection. The subject of debarment and suspension as an eligibility criterion is addressed in “Completing the Pre-Award Process—Eligibility” and “Public Policy Requirements and Objectives—Ethical and Safe Conduct in Science and Organizational Operations—Debarment and Suspension.”
NIH may administratively recover funds paid to a grantee in excess of the amount to which the grantee is finally determined to be entitled under the terms and conditions of the award, including misspent funds or unallowable costs incurred. If the grantee does not pay back the funds in accordance with the demand by the awarding office, which specifies the period of time for repayment, the awarding office may collect the debt by
l making an administrative offset against payments that would be due under other grant awards,
l withholding advance payments that would otherwise be due, or
l taking any other action permitted by statute.
The Federal Debt Collection Act (Act) (31 U.S.C. 3711) and the Federal Claims Collection Standards (4 CFR Parts 101-105) require NIH to collect debts due to the Federal government and, except where prohibited by law, to charge interest on all delinquent debts owed to NIH by grantees (also see HHS claims collection regulations at 45 CFR Part 30). Debts may result from cost disallowances, recovery of funds, unobligated balances, or other circumstances.
Unless otherwise specified in law, regulation, or the terms and conditions of the award, debts are considered delinquent 30 days after notification to the grantee of the indebtedness. The interest on delinquent debts will be computed from the original notification date to the grantee of the indebtedness. The interest rate applied will be the current value of funds rate or the private consumer rate of interest fixed by Treasury, whichever is higher. A higher rate may be charged if necessary to protect the interests of the Federal government.
Penalties and administrative collection costs also will be charged in accordance with the Act and the implementing HHS regulations, as follows:
l A penalty charge of 6 percent a year will be assessed on debts that are more than 90 days overdue. Penalty charges will accrue from the date the debt became overdue until the indebtedness is paid.
l Delinquent debtors will be assessed charges to cover the Federal government’s administrative costs of collecting overdue debts. From time to time, HHS will publish a notice in the Federal Register setting forth the amounts to be assessed for administrative collection costs.
If a grantee appeals an adverse monetary determination under 42 CFR Part 50, Subpart D, or 45 CFR Part 16, collection will be suspended pending a final decision on the appeal. If the determination is sustained (either fully or partially), interest will be charged beginning with the date of the original notification to the grantee of the indebtedness.
NIH will close out a grant as soon as possible after expiration if the grant will not be extended or after termination as provided in 45 CFR 74.71 through 74.73 and in 45 CFR 92.50. Closeout includes ensuring timely submission of all required reports and adjustments for amounts due the grantee or NIH. Closeout of a grant does not automatically cancel any requirements for property accountability, record retention, or financial accountability. Following closeout, the grantee remains obligated to return funds due as a result of later refunds, corrections, or other transactions, and the Federal government may recover amounts based on the results of an audit covering any part of the period of grant support.
Unless the GMO grants an extension, grantees must submit a final FSR, final progress report, and Final Invention Statement and Certification within 90 days of the end of grant support. Failure to submit timely and accurate final reports may affect future funding to the organization or awards with the same PI.
A final FSR is required for
l any grant that is terminated,
l any grant that is transferred to a new grantee, or
l any award, including awards under SNAP, which will not be extended through award of a new competitive segment.
The final FSR must cover the period of time since the previous FSR submission or, for awards under SNAP, the entire competitive segment or as much of the competitive segment as has been funded before termination. Final FSRs must have no unliquidated obligations and must indicate the exact balance of unobligated funds. Unobligated funds must be returned to NIH or must be reflected by an appropriate accounting adjustment in accordance with instructions from the GMO or from the payment office. For those organizations receiving their funds through PMS, final reports, as specified by PMS, must be submitted to that office. It is the grantee’s responsibility to reconcile reports submitted to PMS and to the NIH awarding office. Withdrawal of the unobligated balance following expiration or termination of a grant is not considered an adverse action and is not subject to appeal (see “Administrative Requirements—Enforcement Actions—Recovery of Funds”).
When the submission of a revised final FSR results in additional claims by the grantee, NIH will consider the approval of such claims subject to the following minimum criteria:
l The grantee must indicate why the revision is necessary and explain and implement internal controls that will preclude similar occurrences in the future.
l The charge must represent otherwise allowable costs under the provisions of the grant.
l There must be an unobligated balance for the budget period sufficient to cover the claim.
l The funds must still be available for use.
l NIH must receive the revised FSR within 15 months of its original due date.
A final progress report is required for any grant that is terminated and any award that will not be extended through award of a new competitive segment. The final progress report should include a summary of progress toward the achievement of the originally stated aims, a list of significant results (positive or negative), and a list of publications. The final progress report also should address the following:
l Report on the inclusion of gender and minority study subjects (using the gender and minority inclusion table as provided in the PHS 2590)
l Where appropriate, indicate whether children were involved in the study or how the study was relevant for conditions affecting children (see “Public Policy Requirements and Objectives—Requirements for Inclusiveness in Research Design—Inclusion of Children as Subjects in Clinical Research” and the PHS 398)
l Describe any data, research materials (such as cell lines, DNA probes, animal models), protocols, software, or other information resulting from the research that is available to be shared with other investigators and how it may be accessed.
An original and one copy of this report should be submitted to the GMO.
Final Invention Statement and Certification
The grantee must submit a Final Invention Statement and Certification (HHS 568), whether or not the funded project results in any subject inventions. The HHS 568 must list all inventions that were conceived or first actually reduced to practice during the course of work under the project, and it must be signed by the PI and an AOO. The completed form should cover the period from the original effective date of support through the date of expiration or termination or the award, and it should be submitted to the NIH awarding office. If there were no inventions, the form should indicate “None.” Copies of the HHS 568 form are available on the iEdison website at https://s-edison.info.nih.gov/iEdison/.
HHS permits grantees to appeal to the DAB certain post-award adverse administrative decisions made by HHS officials (see 45 CFR Part 16). NIH has established a first-level grant appeal procedure that must be exhausted before an appeal may be filed with the DAB (see 42 CFR Part 50, Subpart D). NIH will assume jurisdiction for the following adverse determinations:
l Termination, in whole or in part, of a grant for failure of the grantee to carry out its approved project in accordance with the applicable law and the terms and conditions of award or for failure of the grantee otherwise to comply with any law, regulation, assurance, term, or condition applicable to the grant
l Determination that an expenditure not allowable under the grant has been charged to the grant or that the grantee has otherwise failed to discharge its obligation to account for grant funds
l Denial (withholding) of a non-competing continuation award for failure to comply with the terms of a previous award
l Determination that a grant is void (i.e., a decision that an award is invalid because it was not authorized by statute or regulation or because it was fraudulently obtained).
The formal notification of an adverse determination will contain a statement of the grantee’s appeal rights. As the first level in appealing an adverse determination, the grantee must submit a request for review to the NIH official specified in the notification, detailing the nature of the disagreement with the adverse determination and providing supporting documents in accordance with the procedures contained in the notification. The grantee’s request to NIH for review must be postmarked no later than 30 days after receipt of the written notification of the adverse determination; however, an extension may be granted if the grantee can show good cause why an extension is warranted (42 CFR 50.406).
If the NIH decision on the appeal is adverse to the grantee or if a grantee’s request for review is rejected on jurisdictional grounds, the grantee then has the option of submitting a request to the DAB for a further review of the case in accordance with the provisions of 45 CFR Part 16.
A grantee may not submit an appeal directly to the DAB because the DAB will review only those appeals that have been reviewed and acted on by NIH.
In addition to the adverse determinations indicated, the DAB is the single level of appeal for disputes related to the establishment of F&A cost rates, research patient care rates, and certain other cost allocations used in determining amounts to be reimbursed under NIH grants (e.g., cost allocation plans negotiated with State or local governments and computer, fringe benefit, and other special rates).
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